The bank for international settlements believes that stablecoins have not passed the "three key tests".

Gate News bot reported that according to The Block, the bank for international settlements (BIS) claimed in a report released on Tuesday that digital assets pegged to fiat currencies have failed to pass the "three key tests" that would make them a pillar of the monetary system: singularity, resilience, and integrity.

The author of the bank for international settlements wrote in an annual report on the research of next-generation finance: "It remains to be seen what role innovations such as stablecoins will play in the future monetary system. However, stablecoins do not align with the three ideal characteristics of a sound monetary system, and therefore cannot serve as a pillar of the future monetary system."

The author believes that stablecoins do have some advantages, such as programmability, pseudonymity, and "easy access for new users." In addition, their "technical attributes mean they have the potential to offer lower costs and faster transaction speeds," especially in the context of cross-border payments.

However, the authors claim that stablecoins, when combined with the gold standard issued by central banks and instruments issued by commercial banks and other private sector entities, could pose risks to the global financial system by undermining government monetary sovereignty (sometimes through "stealth dollarization") as well as fuelling crime.

Although stablecoins play a clear role at the entry and exit points of the crypto ecosystem and are gaining influence in countries with high inflation, capital controls, or limited access to dollar accounts, these assets should not be regarded as cash.

In other words, stablecoins have failed the stress tests due to their structure. Since assets like Tether's USDT are "backed by supposedly equivalent assets," any "issuance requires full prepayment from the holders," which constitutes a "prepayment cash restriction."

In addition, unlike central bank reserves, stablecoins do not possess the "singularity" of currency—currencies can be issued by different banks and accepted by everyone without hesitation—because they are typically issued by centralized entities that may set different standards and may not always share the same settlement guarantees.

The author writes: "Holders of stablecoins will be marked with the issuer's name, just like the private banknotes circulating during the free banking era in 19th century America. Therefore, the exchange rates of stablecoins often differ, undermining their uniqueness."

For similar reasons, stablecoins "have significant flaws in promoting the integrity of the monetary system" because not all issuers adhere to standardized KYC/AML guidelines or prevent financial crimes.