{“paragraph”:”Amid the digital asset revolution, stablecoins have emerged as one of the most notable innovations, pegged to fiat currencies like the USD to provide stability in the volatile crypto market. However, the Bank for International Settlements (BIS) issued a stark warning in its May 2025 economic report, asserting that stablecoins are not genuine currencies and pose systemic risks to the financial system.”}, {“paragraph”:”The BIS report introduces the ‘Triple Gate’ theory, which outlines three critical criteria for reliable monetary systems: Singleness, Elasticity, and Integrity. Stablecoins struggle to meet these standards due to inherent flaws in their design and operation.”}, {“section_title”:”Singleness Challenge: The Illusion of Stability”,”paragraph”:”Stablecoins’ peg mechanisms rely on private issuers’ credibility and reserve transparency, making them vulnerable to depegging events, as seen in the collapse of algorithmic stablecoin TerraUSD (UST).”}, {“section_title”:”Elasticity Dilemma: The ‘Narrow Bank’ Model”,”paragraph”:”Most stablecoins operate on a 100% reserve model, limiting their ability to support credit creation and economic growth, unlike traditional banking systems that facilitate liquidity expansion.”}, {“section_title”:”Integrity Gap: Anonymity vs. Regulation”,”paragraph”:”Public blockchain-based stablecoins face significant challenges in complying with anti-money laundering (AML) and know-your-customer (KYC) regulations due to their pseudonymous nature.”}, {“paragraph”:”The report also highlights technical vulnerabilities, including reliance on internet infrastructure and potential threats from quantum computing. Furthermore, stablecoins’ growing demand for US Treasuries could strain banking system reserves, imposing a natural limit on their expansion.”}, {“paragraph”:”BIS proposes a ‘Unified Ledger’ solution, integrating tokenized central bank reserves and government bonds within a regulated framework. The future of stablecoins may bifurcate into compliant, transparent models and niche, offshore variants.”}, {“paragraph”:”This analysis underscores the need to balance innovation with financial stability as the world navigates toward a digitized monetary future.”}