Stablecoins and the Future of Money: BIS Insights and South African Perspectives
The Bank for International Settlements (BIS) continues to monitor how digital innovations reshape finance. In a follow‑up to its 2026 annual economic report, the BIS highlighted both the promise and the pitfalls of stablecoins—cryptocurrencies designed to maintain a steady value by pegging to a fiat currency, commodity, or basket of assets.
What the BIS Says About Stablecoins
According to the BIS, stablecoins can enable faster, programmable payments and may boost competition in payment systems. Yet, current designs often fall short of the core attributes that define money—such as universal acceptability, stability, and robust legal backing. The BIS warned that without proper safeguards, stablecoins could threaten financial integrity.
“Advancing the future monetary system requires coordinated efforts by policymakers as well as addressing vulnerabilities in current stablecoin arrangements to mitigate risks and integrate technological advances in tokenization into the two‑tier system to establish trustless forms of programmable money,” the BIS stated.
Risks to Financial Integrity
The BIS pointed out that stablecoins have been linked to a notable share of on‑chain illicit activity. Because they operate on public, permissionless blockchains, users can employ pseudonymity and unhosted wallets, which complicates traditional anti‑money‑laundering (AML) controls such as Know Your Customer (KYC) checks, transaction monitoring, and the ability to freeze or reverse suspicious payments.
In contrast, banks and other regulated intermediaries in traditional finance routinely perform KYC verification, monitor flows, file suspicious activity reports, and can halt or reverse payments when warranted. The pseudonymous nature of many stablecoin transactions undermines these safeguards, creating openings for circumvention.
Regulatory Measures to Reduce Risk
The BIS outlined several policy tools that can help mitigate the risks associated with stablecoin protocols:
- Imposing capital requirements on stablecoin issuers.
- Setting liquidity standards for the reserves backing stablecoins.
- Introducing protections for coin holders, such as redemption guarantees.
- Allowing conditional access to central bank liquidity under strict safeguards.
- Establishing clear disclosure and settlement mechanisms for issuers.
When combined with strong risk‑management practices that avoid moral hazard, these measures could lower the likelihood of runs and strengthen the resilience of stablecoin systems. At a systemic level, enhancing regulatory capabilities, supervision, and market infrastructure is essential for assessing threats to financial stability.
The BIS also stressed the value of international cooperation. Regulatory collaboration on financial integrity is already well‑developed, and various standards bodies are jointly analysing the impact of stablecoins on the global monetary framework.
South Africa’s Crypto Landscape
The South African Reserve Bank (SARB) does not recognise crypto assets as legal tender. In its November 2023 financial stability review, SARB flagged “crypto assets and stablecoins” as an emerging risk to the nation’s financial stability, citing rapid growth and limited oversight that could allow dangers to accumulate unnoticed.
An inventory conducted by SARB showed that the number of South Africans holding crypto trading accounts nearly doubled to 8 million since the start of 2022. Despite the central bank’s cautions, crypto assets have moved beyond a niche interest and are becoming a mainstream financial asset in the country.
The SARB report estimated that almost $63 billion has been lost since 2019 due to crypto‑related incidents, underscoring the potential scale of risk when adequate safeguards are absent.
Policy Developments in South Africa
In April 2024, South Africa’s Finance Ministry proposed a comprehensive overhaul of its decades‑old rules governing money flows. The plan includes tighter controls on crypto assets, aiming to reinforce the country’s position as Africa’s financial hub and attract additional investor capital.
Key elements of the Treasury proposal are:
- Increasing discretionary offshore allowances for individuals.
- Introducing a clear regulatory framework for crypto assets and stablecoins.
- Easing certain capital‑flow restrictions to encourage legitimate investment while maintaining oversight.
These steps reflect a growing recognition that technological advances and well‑designed regulation must work together to harness the benefits of digital money while curbing its risks.
Looking Ahead
Both the BIS and national authorities such as the SARB agree that stablecoins are unlikely to disappear. Instead, their evolution will depend on how effectively policymakers can address the structural vulnerabilities highlighted in recent analyses. By integrating robust capital and liquidity requirements, enhancing transparency, and fostering international regulatory coordination, stakeholders can work toward a monetary system where innovation supports—rather than undermines—trust and stability.
