BIS monetary policy - part.1

Over the past two weeks, the Bank for International Settlements (BIS) has sharpened its stance on stablecoins, warning that they pose serious risks to monetary sovereignty, financial stability, and transparency, especially in emerging economies. BIS Economic Adviser Hyun Song Shin drew parallels between today’s stablecoins and 19th-century U.S. private banknotes, stressing that their lack of settlement backing by central banks makes them inherently fragile. As an alternative, BIS has championed the idea of a “unified ledger”—a tokenised financial architecture that integrates central bank reserves, commercial bank deposits, and government securities into a single programmable platform, allowing safer, more transparent, and more efficient settlement.

Alongside its policy guidance, the BIS has released fresh research into market dynamics. A new working paper (No. 1282) analyzed the financial whiplash following the April 2025 U.S. tariff shock, finding that 60–80% of the subsequent market recovery in equities, copper, volatility indices, and inflation expectations stemmed from the internal dynamics of the tariff shock itself. However, persistent U.S. dollar depreciation and bond yield movements were traced to different drivers, such as a sudden collapse in Treasury market liquidity. By using a novel event-targeted vector autoregression approach, the paper offers central banks and market participants a sharper lens to disentangle overlapping policy and liquidity shocks.

The BIS has also advanced proposals to improve anti-money laundering compliance in digital asset markets, with a focus on crypto-fiat conversion points where risks are highest. It suggested a provenance-based risk scoring framework, which would systematically track and flag illicit crypto inflows before they can be exchanged into traditional currencies. Together with its broader push for tokenised finance and unified ledgers, this initiative underscores BIS’s dual strategy of containing risks in existing digital finance while laying the groundwork for safer next-generation infrastructures.