Bank of England (BOE) Governor Andrew Bailey recently issued a warning against banking institutions issuing stablecoins, stating that the Bank of England should focus on the tokenization of deposits.
In an exclusive interview with The Sunday Times, the UK central bank official indicated that stablecoins introduce systemic risks to banking institutions, potentially undermining the stability of the entire financial system and leading sovereign governments to lose control over their national currencies.
He also added that the UK central bank should not adopt Central Bank Digital Currency (CBDC) or seek to launch centrally managed digital legal tender tokens.
Andrew Bailey is the new chair of the Financial Stability Board (FSB), an international financial regulatory body, a position that suggests he will impose strict limitations on the expansion of stablecoins during his tenure.
Stablecoins are one of the largest segments in the cryptocurrency space, capable of enhancing the geographic availability of fiat currencies by introducing payment channels on-chain, eliminating the reliance on robust banking infrastructure for cross-border fund transfers, thereby making the use of major currencies like the US dollar, euro, and yen more widespread.
The Trump administration has repeatedly indicated that establishing a comprehensive regulatory framework for stablecoins in the United States is a top priority.
US Treasury Secretary Scott Bessent emphasized at the White House Digital Assets Summit in March that stablecoins will expand the dominance of the US dollar, ensuring that the dollar continues to maintain its status as the global reserve currency.
Over-collateralized stablecoin issuers support their digital legal tender tokens with cash or short-term US Treasury bonds (highly liquid assets) held in banking institutions.
By allowing private enterprises to tokenize US debt instruments, the government can alleviate some inflationary pressures on the dollar, expanding the demand for US debt instruments to anyone with a smartphone and a crypto wallet.
Federal Reserve Chairman Jerome Powell has also expressed support for this idea, calling for the United States to develop a coordinated stablecoin policy.
However, corresponding institutions in European countries have repeatedly warned about the US stablecoin plans, expressing concerns that dollar-denominated stablecoins pose a threat to the EU financial system and could even completely replace the euro.
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Original: “Bank of England Governor Warns Against Private Issuance of Stablecoins”
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