Daniel Walker
Andrew Bailey, the Governor of the Bank of England, has raised serious concerns about the rise of stablecoins, warning that they pose a risk to global financial stability and challenge the fundamental concept of money. In a recent interview with The Times, Bailey called on the worldโs major banks to avoid issuing private stablecoins and instead focus on tokenizing traditional deposits.
โIโd strongly prefer that banks look into digital versions of existing money rather than issuing their own stablecoins,โ Bailey told The Times. He emphasized that tokenized depositsโdigital representations of fiat held in commercial banksโpresent a safer and more regulated alternative.
Stablecoins vs. Tokenized Deposits: A Critical Distinction
Bailey, who also chairs the Financial Stability Board, said that private sector stablecoins are ill-suited for payments and lack the safeguards necessary to protect consumers. He also expressed skepticism toward central bank digital currencies (CBDCs), instead urging a global shift toward tokenized deposit models that enhance current banking systems without overhauling them.
On Bitcoin: โItโs Not Moneyโ
Bailey didnโt hold back his opinion on Bitcoin either. He warned investors to approach the asset with extreme caution. โBitcoin is not real moneyโit doesnโt fulfill the key roles of money. If youโre buying it, do so with full awareness of the risks,โ he stated.
His comments came shortly after Bitcoin hit an all-time high of $122,010, according to data from PRIME.
Global Divergence on Crypto Strategy
Bailey also highlighted the diverging paths taken by global powers:
-
The U.S. appears to be embracing stablecoins, as seen in the upcoming Crypto Week debates in Congress and discussions around the GENIUS Act, which would expand private stablecoin issuance.
-
The European Central Bank, on the other hand, is pushing forward with its CBDC initiative.
-
Neither region, according to Bailey, is seriously considering tokenized commercial bank deposits, which he views as the most prudent path forward.
Regulation Must Set a โHigh Barโ for Stablecoins
Bailey noted that if stablecoins are going to be used for payments, they must be held to the same standards as traditional currency. โWeโll need to set strict regulatory benchmarks because users expect the same reliability and protections they receive with conventional money,โ he said.
In a previous appearance at the University of Chicago Booth School of Business in London, Bailey described the crypto landscapeโoutside of regulated stablecoinsโas “pure investment risk.”
