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Andrew Bailey, Governor of the Bank of England and Chair of the Financial Stability Board, has issued a statement, warning banks against issuing their own stablecoins. In a recent interview, Bailey expressed concerns related to the risks of financial stability in digital currency.
Bank of England Warning Against Stablecoins
Andrew Bailey’s comments addressed all the central bankers in the world who have called for stablecoin regulation. He expressed concerns that stablecoins could destabilize the financial system and undermine sovereign governments’ control over their currencies, leading to illicit activities.
Citing the risks associated with cryptocurrency, Bailey suggested that the world’s central banks should pursue tokenized deposits, digital versions of traditional money, rather than adopting private-sector stablecoins or issuing central bank digital currencies (CBDCs).
Bailey said, “I would much rather [banks] go down the tokenised deposit streets and say, how do we digitise our money, particularly in payments.”
Bailey Reiterates Digital Deposits
In his interview, Bailey also said that he did not want the United Kingdom to adopt central bank digital currency (CBDC), also known as the ‘digital pound.’ He said it would be sensible for the UK to work towards digitizing deposits rather than adopting CBDCs.
Bailey stressed his idea by diverging the UK’s view on digital money from the US’s views. He disagreed with US President Donald Trump’s idea on stablecoin, and said, “I would say that the US is going towards stablecoins. The European Central Bank is going towards central bank digital currency. Neither of them is going towards tokenising deposits.”
Final Thought
Additionally, Bailey reiterated that cryptocurrencies are not actual money as they do not function like traditional money, advising investors to approach them cautiously. While the US is currently exploring digital currencies and making new laws to regulate stablecoins, UK authorities are issuing warnings against the potential risks associated with them.
