Bank of England Governor Andrew Bailey said stablecoins could thrive in a system that separates money from credit, reducing the UK’s reliance on commercial banks.
Bank of England (BoE) Governor Andrew Bailey suggested that stablecoins could reduce the United Kingdom’s reliance on commercial banks, signaling a potential shift in the central bank’s stance toward digital assets.
In a Wednesday article in the Financial Times, Bailey said that the current financial system combines money and credit creation through fractional reserve banking, in which banks hold a portion of deposits while lending out the rest. Fractional reserve banking is a system in which banks hold only a fraction of customer deposits in reserve and lend out the rest, thereby creating new money through credit expansion.
“Most of the assets backing commercial bank money are not risk-free: they are loans to individuals and to companies,” Bailey wrote in the FT. “The system does not have to be organised like this.“
