BOE Governor, Andrew Bailey Warns Banks Against Issuing Private Stablecoins
The Bank of England urges caution over stablecoins, favoring tokenized deposits over privately issued digital currencies a different approach from the U.S. more supportive stablecoin innovation
Bank of England Governor Andrew Bailey has issued a stern warning to financial institutions, especially those in the UK, cautioning them against developing and issuing private stablecoins.
In a series of recent interviews, Bailey revealed his concerns about the risks stablecoins pose to financial stability, monetary policy, and the sovereignty of national currencies.
Bailey became the new Chairman of the Financial Stability Board (FSB) in April. However, his comments contrast with the views of other world powers like the US, where the Trump administration has embraced a far more positive approach to stablecoins.
Andrew Bailey Warns Stablecoins Could Undermine Monetary Control
Stablecoins aim to maintain a stable value, usually tied to traditional money. However, issues with transparency and a lack of regulatory oversight raise concerns about their use in illegal activities.
Bailey made it clear that he sees stablecoins as a threat to the traditional banking system. Unlike bank deposits, stablecoins do not offer the same regulatory oversight. According to Bailey, these privately issued digital tokens could take liquidity from regulated institutions, weakening their ability to issue credit and consequently undermining the central banks’ control over monetary policy.
“Stablecoins are being proposed as a form of money, but for something to truly function as money, it must reliably maintain its nominal value. That’s why we must scrutinize them through the lens of both financial stability and monetary integrity.” Bailey revealed in an interview.
Rather than embracing stablecoins, Bailey advocated for the tokenization of bank deposits. “It would also be ‘sensible’ for the UK to move towards digitizing deposits rather than issuing their own central bank digital currencies as a response to private sector stablecoins,” Bailey added.
US Takes a Different Route with its Stablecoin Strategy
Meanwhile, the United States is moving in the opposite direction. Under President Donald Trump, the US administration has made stablecoin regulation a top priority.
Top government officials agree that stablecoins will reinforce US dollar dominance by enabling anyone with a smartphone and crypto wallet to access dollar-backed financial tools.
Private companies like JPMorgan and Citibank are reportedly planning to issue their stablecoins in anticipation of looser regulations. The proposed Genius Act would further establish the legal framework for banks to offer stablecoin products.
