From resilience to robustness?  1

The year in review  1

Old and new fiscal-financial stability nexus  2

Policy implications  3

Stablecoins and beyond  4

I. Progress and peril  7

Resilience tested  7

A resilient start  7

Box A: Global supply chains: adaptability and vulnerability  9

The conflict and its peril  12

Box B: The persistent economic effects of the Iran conflict  14

Navigating progress and peril  17

An inflation comeback  17

AI progress and investment boom under pressure  19

Box C: Transformative AI, long-term growth and r-star  20

Financial vulnerabilities as amplifiers  23

Fiscal positions under increasing strain  27

Policy implications  28

Endnotes  33

Additional notes to graphs  33

References  37

II. High public debt and shifting financial markets: challenges for central banks  41

Introduction  41

Near record-high public debt and evolving fiscal space  42

Box A: Insufficient debt consolidation in good times  44

Box B: Why financial intermediation matters for fiscal space  48

A new form of fiscal-financial stability nexus  49

The increasing role of NBFIs in government bond markets  50

Market functioning and fiscal policy interactions  53

International spillovers and the FX-repo link  54

When fiscal and financial risks reach the central bank  56

The effects of fiscal risk repricing and fiscal policy  56

Monetary policy transmission  58

Addressing market dysfunction  60

Confronting the emerging policy challenges  61

iv BIS Annual Economic Report 2026

Monetary policy  61

Fiscal policy  62

Regulation  62

The design of central bank backstop facilities  64

Conclusion  64

Endnotes  66

Additional notes to graphs  69

References  71

III. Anchoring trust in money: innovation beyond stablecoins  77

Introduction  77

The foundations of trust in money  79

Foundational properties of money  79

Network effects of money  80

Today’s two-tier architecture and the current wave of innovation  81

Box A: The historical emergence of money and of central banking  82

Digital innovation and the quest for new forms of money  83

DLT network settings  83

Box B: The economics of public permissionless blockchains  85

Emergence of stablecoins on public permissionless blockchains  87

Challenges associated with today’s stablecoin arrangements  89

Box C: Regulatory frameworks for stablecoins  92

Macro-financial implications of stablecoins  93

Scenarios for stablecoin reserve assets  93

Macroeconomic implications  95

Box D: Quantifying the impact of stablecoins on bank lending and fiscal space  98

Stablecoin dollarisation  100

Box E: Deposit dollarisation and stablecoins  101

Moving towards the next-generation monetary system  104

Addressing issues in current stablecoin arrangements  105

Bringing technological innovation into the two-tier system  106

Conclusion  108

Endnotes  110

Additional notes to graphs  115

References  115