- Bailey warns stablecoins could undermine control of national currencies.
- UK prefers tokenized deposits over private stablecoin issuance.
- Bank of England distances itself from US and EU approaches.
Andrew Bailey, Governor of the Bank of England and Chair of the Financial Stability Board, has issued a strong warning to commercial banks regarding the issuance of stablecoins. He stated that allowing banks to create their digital tokens could threaten financial stability and weaken government control over national currencies.
In a recent interview, Bailey emphasized that introducing private stablecoins carries significant risks, including illicit usage and the possibility of financial fragmentation.
He described that these types of assets would avoid the centralized monetary systems, which pose problems of control and regulation.
Bailey proposed that rather than creating stablecoin or central bank digital currencies, banks ought to consider tokenizing existing deposits. Such an approach could introduce digitalization without disrupting the banking system and creating uncontrollable alternatives.
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He clarified that the UK is not on the path towards releasing a digital pound. Bailey believes that tokenized bank deposits will represent a safer way to proceed, as they are a controlled way of digitizing money, especially payments.
The Bank of England’s stance differs from policies considered in other large economies. Bailey mentioned that the United States seems to approve stablecoins, and the European Central Bank is making progress with the digital euro.
By contrast, the UK is determined to maintain the establishment of prevailing banking networks through digital innovations without a central bank digital currency.
Bailey Reaffirms Risks and Calls for Global Caution
Bailey also addressed the broader global approach to digital assets. He called on central banks around the world to be cautious and prioritize financial stability in the development of any digital currency frameworks.
In response to recent developments in the U.S., he disagreed with President Donald Trump’s apparent support for stablecoin expansion. According to Bailey, neither the U.S nor the European central bank is in the process of moving towards deposit tokenization, an event that Bailey feels will be more stable and fit the nature of modern finance.
Moreover, Bailey made the population remember that cryptocurrencies cannot be viewed as real money. He cautioned against using digital assets to do what money is really required to do, and using them might mean taking needless risks for investors.
The Bank of England’s stance reinforces the UK’s cautious approach to digital currency. By warning against banks’ issuance of stablecoins, Bailey signals a preference for digital evolution within a secure and regulated financial framework.
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