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Bank of England Governor Andrew Bailey has cautioned against the issuance of stablecoins by private banking institutions, warning that such practices could pose significant risks to financial stability and undermine sovereign control over national currencies.
In a recent interview, Bailey stressed that the Bank of England should instead prioritize the tokenization of traditional bank deposits—an approach he believes would offer innovation in digital payments without compromising monetary authority.
“Stablecoins issued by private entities introduce systemic vulnerabilities,” Bailey stated. “They risk fragmenting the monetary system and could weaken governments’ control over monetary policy and financial stability.”
Bailey also expressed skepticism toward the idea of the Bank of England introducing a central bank digital currency (CBDC), or any centrally issued digital fiat alternative, noting that such initiatives should be approached with caution given their long-term implications for the economy and the banking sector.
Bailey’s comments come as he assumes the role of chairman of the Financial Stability Board (FSB), the global body tasked with monitoring and making recommendations about the international financial system. His new position suggests a firmer regulatory posture on the rising influence of crypto-backed assets and the proliferation of private digital currencies.
Stablecoins and Monetary Sovereignty
Stablecoins—cryptocurrencies pegged to traditional fiat currencies such as the U.S. dollar, euro, or yen—have gained prominence in recent years for enabling cross-border digital payments without relying on conventional banking infrastructure. Their ability to make currencies more globally accessible and programmable has fueled their adoption in remittances, decentralized finance (DeFi), and digital commerce.
However, critics argue that their unregulated growth, especially when issued by private companies, could erode monetary sovereignty and expose users to operational and liquidity risks. Bailey’s remarks reflect mounting concerns among central bankers about stablecoins’ potential to bypass regulated financial channels.
Toward Safer Innovation
Instead of supporting privately issued stablecoins or launching a BOE-managed CBDC, Bailey advocates for deposit tokenization—the digital representation of commercial bank deposits using secure blockchain-based systems. This model, he argues, maintains the integrity of the traditional financial system while enabling innovation in payments and settlement.
His stance aligns with other global regulators who are exploring public-private models to modernize payments infrastructure without ceding control to decentralized or corporate-led financial ecosystems.
Bailey’s tenure at the FSB is expected to bring increased scrutiny to the digital asset sector, with stablecoins likely to be a top priority in efforts to safeguard global financial stability.
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