Stablecoins Need to Be Regulated Like Commercial Bank Money, Bank of England's Andrew Bailey Says

The central bank governor also said regulators can't rule out central bank digital currencies as the U.K. explores a digital pound.

AccessTimeIconApr 12, 2023 at 3:03 p.m. UTC
Updated Apr 12, 2023 at 8:28 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Stablecoins would need to be regulated like commercial bank money, said Bank of England (BoE) Governor Andrew Bailey in a Wednesday speech at the Institute of International Finance.

Bailey said that stablecoins, which are digital currencies pegged to the value of other assets like fiat currencies, "purport" to be money but do not have an assured value.

"At the Bank of England we have concluded that the public should expect assured value in digital money, and confidence in this is needed to underpin financial stability," Bailey said.

"For stablecoins to function as money they will need to have the characteristics of, and be regulated as, inside money," he added, referring to money issued by private entities like commercial banks.

The collapse of Terra's algorithmic stablecoin terraUSD (UST) last year wiped out billions of dollars from the crypto market and prompted regulators to question the stability of stablecoins.

Shortly after the collapse last May, the BoE announced plans for a regime to monitor stablecoins that can influence the broader financial system. The U.K. government is also consulting on new rules for crypto broadly. Separately, the country is looking to regulate stablecoins as payment under the new Financial Services and Markets Bill being debated in Parliament.

When it comes to digital money, regulators cannot rule out a central bank digital currency, said Bailey who has previously been critical of stablecoins.

The U.K. is now exploring the issuance of a digital pound that could "anchor the value of all forms of money, including new digital ones and to ensure the maximum opportunity for innovation in payments services," according to the central banker.

Bailey also urged investors to be cautious of crypto.

"Unbacked crypto ... could be a bet, a highly speculative investment or a collectible, but note that it has no intrinsic value, so buyer be very aware," Bailey said.

Speaking later in the day at the International Monetary Fund (IMF) annual Spring Meeting, Bailey gave a warning about the problems that can come from the nonbank world, including crypto.

"Some of these problems can blow up in fairly small pockets of that world, but they have the ability to spread in ways that we didn't necessarily initially predict," Bailey said.

Update (April 12, 2023, 20:18 UTC): Added Andrew Bailey's International Monetary Fund comment.

Edited by Sandali Handagama.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Camomile Shumba

Camomile Shumba is a CoinDesk regulatory reporter based in the UK. She previously worked as an intern for Business Insider and Bloomberg News. She does not currently hold value in any digital currencies or projects.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.