Central banks are sounding the alarm on stablecoins — again. But this time, I think we need to dig deeper.

Over the past few weeks, heavyweight institutions have lined up to deliver their verdict. First, the Bank for International Settlements (BIS) declared that stablecoins “perform badly” against criteria for sound money. Then ECB adviser Jürgen Schaaf weighed in with his own analysis.

The headlines were predictable: stablecoins lack central bank backing, they enable illicit activities, and they can’t serve as lenders of last resort. The FT’s coverage — which I’ll admit led me astray initially — painted a stark picture of technological innovation versus institutional stability.

But here’s what caught my attention: while the BIS delivered exactly what you’d expect from the world’s central banking hub (surprise: they prefer central banks!), Schaaf’s take was refreshingly nuanced. Yes, he warned about monetary sovereignty. But he also acknowledged something crucial — the opportunities are real and shouldn’t be dismissed.

This got me thinking. Are we having the right conversation about stablecoins? Or are we trapped in a binary debate that misses the bigger picture?

My professional journey provides a multifaceted perspective on finance. Beginning with solid grounding in finance, strategic transactions, and macroeconomics, my career evolved into fintech and digital payments leadership. I drove innovation and growth strategies while navigating complex regulations. Now, as board advisor and finance committee chair, I bridge vision with execution to ensure solid governance and financial sustainability. As an avid reader staying current on key development in the industry, I’m at the center of heated stablecoin debates. From this vantage point, I felt compelled to write this article, offering a clear perspective on one of modern finance’s most critical topics.

After diving into these institutional positions and the broader discussion, I’ve summarised some of the points I think are missing from this debate. Because when you strip away the ideology and look at what’s actually happening in markets today, the stablecoin story becomes far more interesting — and important — than either critics or champions want to admit.

Let me share my humble musings.

1. Currency Pegs Past and Present: A More Sophisticated View on Stablecoin Usage

Currency pegging has always been a high-stakes game — even for central banks. During the 1992 European Monetary System crisis, respectable institutions defending official pegs still couldn’t prevent the inevitable collapse. Yet the EMS was a necessary stepping stone to the euro, proving that sometimes imperfect solutions serve their time and purpose.

The issue of today’s stablecoin debate is the temptation of treating all stablecoins the same ignoring structure and context.

A USD stablecoin issued under MiCA’s stringent framework is worlds apart from a rouble-pegged token out of Kyrgyzstan (yes, it exists — look it up). Lumping them together makes as much sense as comparing the Swiss franc’s historical peg to the euro with Argentina’s various failed dollar pegs. Same mechanism, vastly different realities.

The truth is, every stablecoin is only as credible as the institution defending its peg. Just like traditional currency pegs, it’s not the structure that matters — it’s the execution. That is precisely why MiCA focuses on strict issuer requirements.

Today the strongest demand for stablecoins is coming from developing economies, already effectively dollarised in real terms, where local currencies are extremely volatile and financial institutions weak. There, USD-backed stablecoins aren’t ideological experiments — they’re survival tools. When your government’s dollar peg is disintegrating or your savings are evaporating, that any stablecoin suddenly looks like the most stable option available. The considerations from Frankfurt or Basel might be irrelevant in Buenos Aires or Lagos.

Hence, the BIS take on stablecoins is too generalised to hit the mark. Stablecoins are not all “poor performers” or inherently bad because of the peg structure.

2. Official Currencies Aren’t Perfect Either — But That’s Not the Point

Let’s move past the false equivalence: stablecoins aren’t official currencies (or fiat money), and outside of ideological echo chambers, everyone knows it. But here’s what’s interesting — official currencies aren’t the flawless paragons we pretend they are either.

Liquidity? It’s relative. Ever tried spending a €100 bill in rural Provence? I have. Despite holding perfectly legitimate euros backed by the ECB, I might as well be holding Monopoly money. My “official” currency becomes remarkably illiquid when the local café only takes cash and won’t break large bills.

Critics worry stablecoins enable illicit transactions, but have we forgotten that USD banknotes — both real and counterfeit — remain the currency of choice for global illegal trade? Last I checked, this hasn’t toppled the Fed’s credibility or undermined the dollar’s dominance.

Which brings us to the real battleground: elasticity and leverage.

Remember 2008, when excessive leverage caused the global financial markets to implode and the ripple effects plunged the world into a dramatic credit crunch? It prompted unprecedented government and central banks interventions to stabilize the system. Central banks saved the day showcasing exactly why monetary elasticity matters, as the interest rates interventions quickly trickled through the markets and the real economy.

This is the material risk affecting stablecoins and real currency alike and here’s what keeps central bankers up at night: highly leveraged stablecoins could recreate 2008’s conditions, but potentially on steroids and depriving central banks of effective intervention tools.

The stablecoin debate isn’t about whether they are “real” money. It’s about whether we’re building a parallel system that amplifies the very risks we barely survived before.

That’s a conversation worth having — minus the ideology.

3. Why Stablecoins Don’t Need to Be ‘Real’ Money to Matter

Let’s challenge a fundamental assumption: Do stablecoins need to tick every box of traditional money to have value? I don’t think so — and here’s why.

Right now, stablecoins excel at one critical function: settlement. They’re making cross-border wholesale transfers faster and cheaper than traditional correspondent banking ever could. In short-term transactions, where default risk is minimal and central bank backstops matter less, they’re actually outperforming the status quo.

This is precisely why forcing stablecoins into the traditional money mold misses the point entirely. They don’t need to be units of account — that role stays with the currencies they reference. They’re not designed for long-term value storage — that’s what pure cryptocurrencies attempt to do. And honestly? That’s perfectly fine.

Yes, the BIS is right that stablecoins lack monetary sovereignty. Yes, their pegs can be shaky. But demanding they fulfill all three functions of money is like criticizing a Formula 1 car for having poor cargo space. It’s ideologically neat but practically irrelevant.

The proof? Six months after MiCA’s introduction in the EU — with its stringent asset-backing requirements — stablecoin usage remains robust. Despite the regulatory friction, they continue to thrive in their sweet spot: efficient settlement.

Sometimes innovation means doing one thing exceptionally well, not everything adequately. That’s the stablecoin story, and it’s one worth understanding beyond ideological debates.

4. Evidence Over Ideology: Why the Stablecoin Debate Needs a Reality Check

Let’s be clear: dismissing stablecoins based on ideology while ignoring real-world evidence is a mistake we can’t afford to make.

Right now, stablecoins are doing what correspondent banks couldn’t — making cross-border wholesale transfers faster and cheaper. That’s not theory; that’s happening today.

Schaaf hits the nail on the head: the real concern for central banks isn’t whether stablecoins exist, but whether they’ll create an uncontrolled synthetic money supply that undermines monetary policy effectiveness.

That’s the conversation we should be having. Everything else is noise.

The future of finance isn’t about choosing sides — it’s about understanding what works, why it works, and how we can harness innovation without losing control of what matters most.