The "Triple Gate" Dilemma of Stablecoins and the Path Forward

In the field of digital assets, stablecoins are undoubtedly one of the most remarkable innovations in recent years. They promise to be pegged to fiat currencies like the US dollar, creating a "safe haven" of value in the volatile world of cryptocurrencies, and have gradually become an important infrastructure for decentralized finance and global payments. Their market capitalization has jumped from zero to hundreds of billions of dollars, seemingly heralding the rise of a new form of currency.

However, the Bank for International Settlements (BIS) issued a stern warning in its economic report in May 2025. The BIS pointed out that stablecoins are not real money, and the booming ecosystem behind them harbors systemic risks that could shake the entire financial system. This conclusion forces us to reassess the nature of stablecoins.

This article will delve into the "triple gate" theory of currency proposed by the BIS report — that is, any reliable currency system must pass through three tests: singularity, elasticity, and integrity. We will analyze the dilemmas faced by stablecoins at these three gates using specific examples, and explore the future direction of currency digitalization.

The First Door: The Dilemma of Uniqueness - Can Stablecoins Ever Be "Stable"?

The "uniqueness" of currency is the cornerstone of the modern financial system. It means that at any time and in any place, the value of one unit of currency should be exactly equal to the face value of another unit. In short, "one dollar is always one dollar." This constant uniformity of value is the fundamental premise for currency to perform its three main functions: as a unit of account, a medium of exchange, and a store of value.

The BIS believes that the value anchoring mechanism of stablecoins has inherent flaws, making it fundamentally unable to guarantee a 1:1 exchange with fiat currency. Its trust does not come from national credit, but relies on the commercial credit of private issuers, the quality and transparency of reserve assets, which makes it susceptible to the risk of "decoupling" at any time.

Recent lessons are enough to illustrate the problem. The collapse of the algorithmic stablecoin UST saw its value drop to zero in just a few days, erasing hundreds of billions of dollars in market capitalization. This vividly demonstrates how fragile the so-called "stability" is when the trust chain breaks. Even for asset-collateralized stablecoins, the composition of reserve assets, auditing, and liquidity have been subject to constant scrutiny. Therefore, stablecoins already face significant challenges at the first threshold of "uniqueness."

The Second Gate: The Tragedy of Elasticity - The "Beautiful Trap" of 100% Reserve

If "uniqueness" pertains to the "quality" of currency, then "elasticity" relates to the "quantity" of currency. The "elasticity" of currency refers to the ability of the financial system to dynamically create and contract credit based on the actual demand of economic activities. This is the key engine that enables the modern market economy to self-regulate and sustain growth.

The BIS points out that stablecoins, particularly those that claim to have 100% high-quality liquid assets as reserves, are essentially a "narrow banking" model. This model uses users' funds exclusively to hold safe reserve assets, without engaging in lending. While this sounds very safe, it comes at the cost of completely sacrificing monetary "elasticity".

This "inelastic" characteristic not only limits the development of stablecoins themselves but also poses a potential impact on the existing financial system. If a large amount of funds flows out of the commercial banking system and turns to holding stablecoins, it will directly lead to a reduction in the funds available for banks to lend, shrinking their credit creation capacity. This may trigger a credit crunch, raise financing costs, and ultimately harm small and medium-sized enterprises and innovative activities that need financial support the most.

The Third Gate: The Lack of Integrity - The Eternal Game between Anonymity and Regulation

The "integrity" of currency is the "safety net" of the financial system. It requires that payment systems must be secure, efficient, and able to effectively prevent illegal activities such as money laundering, terrorist financing, and tax evasion. This necessitates a sound legal framework, clear division of responsibilities, and strong regulatory enforcement capabilities to ensure the legality and compliance of financial activities.

The BIS believes that the underlying technological architecture of stablecoins—especially those built on public chains—poses a severe challenge to the "integrity" of finance. The core issue lies in the anonymity and decentralization features, which make traditional financial regulatory measures difficult to implement.

The technical characteristics of stablecoins fundamentally challenge the regulatory model based on intermediaries. This is precisely why global regulators remain highly vigilant and continually call for their inclusion in a comprehensive regulatory framework. A monetary system that cannot effectively prevent financial crime, regardless of how advanced its technology is, will find it difficult to gain the ultimate trust of society and government.

Supplementary Thoughts: Real Issues Beyond the BIS Framework

1. The technical vulnerabilities of stablecoins

In addition to the challenges at the economic level, stablecoins are also not without flaws at the technical level. Their operation is highly dependent on the internet and the underlying blockchain networks. In the event of a large-scale network outage, submarine cable failure, widespread power paralysis, or targeted cyber attacks, the entire stablecoin system could come to a standstill or even collapse. This absolute dependence on external infrastructure represents a significant weakness compared to traditional financial systems.

The longer-term threat comes from the disruption of cutting-edge technology. For example, the maturity of quantum computing could pose a fatal blow to most existing public key encryption algorithms. Once the encryption system that protects the security of blockchain account private keys is cracked, the security foundation of the entire digital asset world will cease to exist.

2. The Real Impact of Stablecoins on the Financial System and the "Ceiling"

The rise of stablecoins is directly competing with traditional banks for the most core resource - deposits. If this trend of "financial disintermediation" continues to expand, it will weaken the core position of commercial banks in the financial system, thereby affecting their ability to serve the real economy.

What is worth discussing in depth is the process by which stablecoin issuers support their value by purchasing U.S. Treasury bonds. This process is not as simple and straightforward as it sounds, as there is a key bottleneck behind it: the reserves of the banking system. When stablecoin issuers purchase U.S. Treasury bonds on a large scale, it ultimately flows through the Federal Reserve's settlement system, resulting in a decrease in the reserve account balance of the issuer's bank at the Federal Reserve.

Commercial banks do not have unlimited reserves at the Federal Reserve. If the scale of stablecoins continues to expand, large purchases of U.S. Treasuries will lead to excessive consumption of the reserves in the banking system, causing banks to face liquidity pressure and regulatory pressure. Therefore, the demand for U.S. Treasuries from stablecoins is limited by the adequacy of reserves in the banking system and the constraints of regulatory policies, and cannot grow indefinitely.

The Future of Stablecoins

Considering the BIS's warnings and market demand, the future of stablecoins seems to be at a crossroads. It faces pressure from global regulators while also seeing the potential to be integrated into the mainstream financial system.

The future of stablecoins is essentially a game between their "wild innovative vitality" and the core requirements of the modern financial system for "stability, security, and controllability." Finding a balance between the two is a common challenge faced by all regulators and market participants.

In the face of this challenge, the BIS proposed a "unified ledger" solution based on central bank currencies, commercial bank deposits, and government bonds that are "tokenized." This is essentially a "co-optation" strategy aimed at harnessing the advantages of tokenization technology while placing it on a trust foundation led by central banks.

Although the BIS has outlined a clear blueprint, the evolution of the market is often more complex and diverse. The future of stablecoins is likely to show a differentiated trend:

• Compliance Path: Some stablecoin issuers will actively embrace regulation, achieving full transparency of reserve assets, undergoing regular third-party audits, and integrating advanced AML/KYC tools.
• Offshore/Niche Market Path: Another portion of stablecoins may choose to operate in regions with relatively loose regulations, continuing to serve the needs of decentralized finance, high-risk cross-border transactions, and other specific areas.

The "triple gate" dilemma of stablecoins not only reveals its own structural defects but also reflects the shortcomings of the existing global financial system in terms of efficiency, cost, and inclusiveness. True progress may lie in prudently integrating "top-down" design with "bottom-up" market innovation, finding a middle path between "encirclement" and "reconciliation" towards a more efficient, safer, and more inclusive financial future.