Bank of England governor Bailey warns banks against issuing own stablecoins
The governor is also chair of the Financial Stability Board, which is responsible for monitoring risks in financial markets globally
[LONDON] Bank of England governor Andrew Bailey has warned the world’s largest banks against issuing their own stablecoins, setting up a potential clash with US President Donald Trump’s administration and its backing of the digital assets.
Speaking in an interview with The Times newspaper, Bailey said he “would much rather” banks offer digital versions of traditional money, known as tokenised deposits, than stablecoins, which are designed to hold a steady value and are usually pegged to a traditional currency.
Bailey also warned that stablecoins threaten to take money out of the banking system and leave less funds available for lending, according to The Times interview.
The governor is also chair of the Financial Stability Board, which is responsible for monitoring risks in financial markets globally. His stance is at odds with the direction being taken by the US under Trump, which has passed stablecoin legislation setting up regulatory rules for cryptocurrencies pegged to the US dollar.
A Trump-affiliated stablecoin already has a US$2.2 billion market value.
Bailey’s concerns have been echoed by other central bankers, who have called for laws regulating stablecoin companies in much the same way as banks. They worry about issues such as the risk of stablecoin crashes, which could trigger fire sales of their underlying assets, and the prospect of vast sums changing hands outside of the formal banking system, enabling crimes such as money laundering.
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Bailey also hinted that he did not want the UK to adopt a central bank digital currency (CBDC), known as the digital pound. He said it would be “sensible” for the UK to head towards digitising deposits instead of issuing a CBDC in response to private sector stablecoins. BLOOMBERG
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