Bank of England (BOE) Governor Rejects Crypto and Stablecoins, Favors Advancements in Digital Money
In a recent speech on July 10, Bank of England (BOE) Governor Andrew Bailey addressed the central bank’s role in controlling inflation and maintaining public trust in financial institutions. During his speech, Bailey expressed his skepticism towards cryptocurrencies, stating that they do not qualify as money. Instead, he advocated for the development of “enhanced digital money” as a preferable alternative.
Bailey highlighted recent bank failures in the United States and Switzerland, emphasizing the issues surrounding the singleness of money and settlement finality. According to him, both cryptocurrencies and stablecoins fail to meet these fundamental criteria, although he did not elaborate on the specifics. Bailey stated definitively, “They are not money.” However, he noted that the passage of the Financial Services and Markets Act would bring stablecoins in line with regulatory requirements.
In contrast, Bailey discussed the potential for enhancing digital money, which already exists in the form of fully digitalized currencies held in IT systems. He proposed expanding its capabilities to include executable actions, such as contingent actions within smart contracts. Bailey also mentioned central bank digital currency (CBDC) as another form of enhanced digital money, emphasizing that it doesn’t necessarily have to be solely issued by central banks. However, he pointed out the advantages of a retail CBDC in promoting the singleness of money and providing the public with an everyday usable form of central bank-backed currency.
Regarding wholesale CBDC, Bailey expressed the BOE’s focus on upgrading its Real-Time Gross Settlement system to integrate central bank digital money with tokenized transactions. He described this approach as the fastest and most efficient route, suggesting that a separate wholesale CBDC may not be necessary. Bailey also acknowledged the enduring presence of cash, stating, “cash is here to stay.”
In summary, Bailey’s speech highlighted his reservations about cryptocurrencies and stablecoins while advocating for the development and enhancement of digital money, including the potential implementation of a retail CBDC and the integration of digital money into existing systems like the BOE’s Real-Time Gross Settlement.