The world's central bankers have warned that privately issued stablecoins should not become the foundation of the monetary system, even as Bermuda moves ahead with plans to expand stablecoin payments and explore a digitally native Bermuda dollar.

In its 2026 Annual Economic Report, the Bank for International Settlements said stablecoins could improve how payments work in economies like Bermuda but that they fall short of the core characteristics of money and could pose risks if they are widely adopted.

The report comes as Bermuda plans a major digital leap forward. The Government has proposed legislation allowing stablecoin payments for certain government services and has recently shifted away from existing dollar-backed stablecoins like the United States Dollar Coin and towards a digitally native Bermuda dollar.

Earlier this year, Bermuda Commercial Bank argued that the island's small size made services like Apple Pay hard to justify for residents. However, Andy Mielczarek, BCB’s chief executive officer, said stablecoin-based digital wallets could provide a similar one-touch payment experience by building on infrastructure already in place.

Recently, Bermuda Commercial Bank’s chief commercial officer called stablecoin a “killer app” for cross border transactions.

Speaking at the Salt Bermuda Digital Finance Forum, Hugo Rogers said BCB’s entire purpose is to link Bermuda to the rest of the world.

While the bank does not issue its own stablecoin, it does support stablecoin-based payment rails.

“We have on-off ramps into digital assets within us and with partners offering a direct stablecoin channel to do cross-border payments,” Mr Rogers said, adding that stablecoin is a disrupter for insurance, reinsurance, trade finance, paying suppliers and more. “Stablecoin payments are here to stay.”

However, in its report, the BIS pushed back. It said stablecoins have the potential to support faster payments but argued that “technology should serve — not undermine — the core public good functions of money”. It said current stablecoin designs fall short of what would be needed to underpin the monetary system.

The BIS pointed to shortcomings like limited interoperability, constraints on liquidity, and redemptions creating stress in financial markets. It also warned of the risk of “stablecoin dollarisation”, particularly in smaller and developing economies, where widespread use of foreign-currency stablecoins could weaken local monetary systems.

Rather than relying on privately issued stablecoins, the BIS argued that future payment systems should build on tokenised versions of central bank money and commercial bank money.

Industry participants, however, said stablecoins are addressing genuine shortcomings in today's payments infrastructure.

Ryan Kirkley, chief executive and cofounder of Global Settlement Network, told The Royal Gazette that cross-border payments remained “slow, expensive and unpredictable”, particularly for businesses managing suppliers and cashflow across multiple markets.

He argued stablecoins should work alongside regulated banks, foreign exchange providers and payment networks rather than outside them.

Edwin Mata, CEO and cofounder of Brickken, said dollar-backed stablecoins were giving the US dollar “a new global distribution channel” as they became easier to use for international transfers and online commerce.

However, he acknowledged local scepticism about relying on technology built outside Bermuda.

He said the challenge will be ensuring the technology remained closely connected to the domestic financial system.

“The payment problem is real: international transfers are slow, settlement costs are high, and many businesses depend on banking rails that were not designed for instant global commerce,” Mr Mata said.

“Digital dollars can improve that experience and give companies faster access to liquidity. But the trade-off is clear. A better payment rail can also increase dependence on infrastructure controlled outside the country.”

The Ministry of Finance was invited to comment on whether the BIS report affects Bermuda's digital payments strategy.