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The Bank for International Settlements (BIS), the institution that serves as a bank for the world's central banks, has delivered a pointed assessment of the booming stablecoin market in its <a href="https://www.bis.org/publ/arpdf/ar2026e3.pdf" rel="noopener noreferrer nofollow">2026 Annual Economic Report</a>.&nbsp;
Crypto's most widely used dollar tokens, it argues, borrow the conveniences of blockchain technology without the institutional foundations that make money trustworthy, and scaling them up in their current form could import fresh risks.
<a href="https://www.thestreet.com/crypto/markets/markets-surge-after-senate-advances-key-clarity-bill" rel="noopener noreferrer nofollow">Related: Markets surge as Clarity Act clears Senate committee in landmark 15-9 vote</a>
<h2 id="not-yet-money">Not yet money</h2>
Stablecoins are cryptocurrencies designed to hold a steady value.&nbsp;The report stresses that stablecoin growth is concentrated in two <a href="https://www.thestreet.com/crypto/markets/veteran-asset-manager-issues-stark-warning-for-tether-circle-" rel="noopener noreferrer nofollow">U.S. dollar-pegged tokens</a>, namely&nbsp; Tether's USDT and Circle's USDC, the two largest by market capitalization. They sit well above the next tier of coins, including Sky's USDS, BitGo's USD1 and Ethena's USDE.
The report added that this makes 99.4% of fiat-backed stablecoins by market value pegged to the dollar in a market worth roughly $320 billion as of end-May 2026.
With secondary-market prices that drift from a dollar and common redemption frictions, the report concludes that current designs resemble <a href="https://www.thestreet.com/crypto/investing/xrp-etf-inflows-top-200-million-as-institutions-keep-buying" rel="noopener noreferrer nofollow">exchange-traded fund</a> (ETF) shares more than a usable means of payment.
Because stablecoins circulate on public, permissionless blockchains where pseudonymous wallets blunt anti-money-laundering checks, the BIS says they account for a significant share of illicit on-chain activity.&nbsp;
It also flags a risk that a wave of redemptions could force fire sales of the Treasury bills backing many of these stablecoins. This might transmit stress to money markets and the broader market for sovereign debt.
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<h2 id="a-dollarization-threat-for-emerging-markets">A dollarization threat for emerging markets</h2>
The sharpest warning targets emerging economies. Demand for dollar stablecoins, the report cautions, could mirror classic "dollarization."&nbsp;
This means it would allow households to bypass capital controls, reshape cross-border flows, and erode <a href="https://www.thestreet.com/crypto/innovation/solana-exec-says-big-banks-are-already-preparing-to-settle-in-stablecoins" rel="noopener noreferrer nofollow">monetary sovereignty</a>. Like past episodes, the BIS notes, such a shift could prove difficult to reverse.
The BIS does not call for a ban. Instead it recommends fixing stablecoin weaknesses while integrating blockchain technology into the existing banking system, with tokenized money anchored in central bank reserves.
Stablecoins remain politically contested as the White House pushes to pass the CLARITY Act, the broader crypto market-structure bill, by a July 4 target. Among its sticking points is a provision on <a href="https://www.thestreet.com/crypto/markets/new-york-wants-big-tech-out-of-stablecoin-business" rel="noopener noreferrer nofollow">stablecoin yield</a>, which is returns paid to holders for keeping funds in stablecoins. It resembles bank-deposit interest, typically generated through lending, staking, or reserve earnings.
<a href="https://www.thestreet.com/crypto/policy/stablecoin-bill-elizabeth-warren-consumer-risks" rel="noopener noreferrer nofollow">Related: As Senate pushes stablecoin bill, Elizabeth Warren warns of risks to consumers</a>

Global banking body issues blunt warning on stablecoin boom

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