Bank of England Cautions Against Issuing Stablecoins

Bank of England Governor Andrew Bailey has cautioned major banks against issuing their own stablecoins, calling these crypto assets a threat to financial stability and the fundamental concept of money during an interview with The Times. Bailey advocates for central banks to focus on tokenized deposits—digital representations of traditional currency—rather than adopting private stablecoins or issuing central bank digital currencies (CBDCs). "I would much rather banks explore tokenized deposits and find ways to digitize our money, especially for payments," he said. In his role as chair of the Financial Stability Board, established post-2008, Bailey also advised investors to be wary of Bitcoin, stating, "It’s not money; it lacks the functions of money, and if you choose to buy it, do so with full awareness of the risks involved." The price of Bitcoin reached a new peak of approximately $119,450 on Sunday, according to The Block's Bitcoin Price page. Bailey's warnings come just ahead of discussions in the U.S. Congress regarding crypto legislation, as part of the declared "Crypto Week" by the House GOP. The focus will likely be on a version of the GENIUS Act approved by the Senate, aimed at facilitating rather than limiting the issuance of stablecoins by companies and banks, along with other potential regulatory measures regarding CBDCs. “The U.S. is moving toward stablecoins while the European Central Bank is leaning toward central bank digital currency. Neither is focusing on tokenizing deposits,” Bailey noted. Earlier, Bailey had expressed similar concerns about cryptocurrencies at The University of Chicago Booth School of Business in London, characterizing non-stable cryptocurrencies as "pure investment risk." He indicated that he would support stringent regulations on stablecoins, stating, "We need to establish high standards for stablecoins since users expect them to function like money." This article is for informational purposes only and is not intended as legal, tax, investment, financial, or other advice.