Tether CEO Challenges BIS Over Stablecoin Criticism, Points to Bank Reserve Practices

Tether CEO Paolo Ardoino pushed back against recent comments from the Bank for International Settlements, arguing that fully-reserved stablecoins are structurally safer than tokenized bank deposits. He said the BIS has legitimate reason to be concerned, since stablecoins highlight long-standing weaknesses in the traditional banking system’s fractional-reserve model.

Comparing Reserve Structures

Ardoino contrasted Tether’s stablecoin, which he says is fully backed by liquid assets such as government treasuries, with tokenized bank deposits, which he claims typically hold only about 10% in liquid reserves. He questioned why anyone would choose a partially backed financial product over one that is fully reserved, suggesting the difference could become more apparent to depositors over time.

Fractional-Reserve Banking Explained

The comparison points to fractional reserve banking, a system where banks retain only a portion of customer deposits while lending out the rest. This structure functions smoothly under normal conditions but can come under pressure if a large number of depositors attempt to withdraw funds simultaneously.

BIS Official Defends Tokenized Bank Deposits

The exchange followed remarks from a senior BIS official at the Jackson Hole Economic Symposium, where tokenized bank deposits were described as a stronger foundation for the future monetary system compared to stablecoins. The official pointed to several shortcomings in current stablecoin design, including inconsistent redemption value, lack of compatibility across different blockchain networks, and limited oversight due to a large share of stablecoin holdings being stored in self-custodied wallets.

Tether’s stablecoin traded largely flat following the exchange, with retail sentiment shifting to a more neutral stance even as public discussion around the topic remained active.