Bank of England chief Andrew Bailey warns of the risks associated with the implementation of stablecoins and suggests alternative solutions for the digital economy.
Risks of Stablecoin Use
In a recent interview, Bailey expressed concerns about potential threats to financial stability related to the widespread adoption of stablecoins. He pointed out that allowing banks to issue private tokens could weaken their lending capacity and create systemic vulnerabilities, especially in times of market stress. "If money leaves the banking system, banks have less to lend," he warned.
Comparison with US Policy
Bailey's comments highlight the growing divergence between UK and US policy on digital assets. While the US, under President Trump, has embraced stablecoin innovations, including the rollout of the USD1 token with a $2.2 billion market cap, the UK is taking a more cautious approach.
Proposals for Digital Deposits
Bailey also appeared skeptical about the need for a UK central bank digital currency. Rather than pursuing a digital pound, he suggested that digitizing commercial deposits would be a more 'sensible' approach that preserves the core functions of the banking system.
The Bank of England's position reflects a growing divide in global digital currency policy between jurisdictions pushing for speed in innovation and those prioritizing systemic safeguards and regulatory control.
