Singleness of money

The BIS Annual Economic Report 2025 calls the ability to settle payments at par the foundation of any monetary arrangement. Because every euro is accepted at full value, a shop does not check which bank issued the money it receives. Without singleness, each payment would carry a small exchange calculation, and trade would slow down.

Singleness holds today because deposits at different banks settle with each other in central bank money and can always be turned into cash at par. In the euro area that settlement runs through TARGET2 and TIPS.

In BIS Bulletin 73, Rodney Garratt and Hyun Song Shin argue that private tokens circulating as bearer instruments, like stablecoins, can drift away from par, while tokenized deposits that settle in central bank money support singleness. The 2025 report adds two more tests, elasticity and integrity, and concludes that stablecoins perform poorly against all of them.

A stablecoin can trade below one euro on a secondary market when holders doubt its reserves, even if the issuer redeems at par. MiCA addresses this with redemption rights for e-money tokens. Tokenized deposits stay a bank liability and settle through the banking system, which is why central banks favor them for payments between institutions.

A Bank of England working paper finds that small deviations from singleness may be harmless, and that problems are more likely when new money comes from issuers whose business differs from that of banks. In the euro area two plans keep public money at the center: the digital euro, which gives the public central bank money in digital form, and settlement of tokenized wholesale transactions in central bank money.

Treasurers and payment firms feel the issue when they accept several euro stablecoins. Each one needs its own redemption route and accounting, and a small discount on one coin becomes a loss on the balance sheet. Stablecoin payments covers the operational side.

Singleness of money is the principle that all forms of a currency, whether cash, central bank reserves or bank deposits, are exchanged at par. It allows people to accept money without checking who issued it.

The BIS argues that stablecoins can trade away from par and so put singleness at risk. MiCA requires issuers of e-money tokens to redeem at par, which limits the risk for regulated euro stablecoins without removing it on secondary markets.

Yes, according to the BIS, as long as they remain bank deposits that settle in central bank money. They are then the same money as an ordinary account balance, on a different ledger.