Bank of England’s Bailey Issues Stablecoin Warning Amid Regulatory Concerns

The Bank of England’s Governor, Andrew Bailey, interviewed by The Sunday Times on July 14, warned of stablecoins posing systemic risks to financial stability. Bailey suggested focusing on deposit tokenization over CBDCs.

Bailey’s remarks highlight growing concerns about financial market stability amid increasing use of bank-issued stablecoins. European policymakers share apprehensions about the US pushing a dollar-backed stablecoin.

Bank of England Prioritizes Deposit Tokenization

Andrew Bailey’s interview underscores systemic risks linked to stablecoins and their potential to destabilize financial systems. As the recently-appointed Chairman of the Financial Stability Board, Bailey’s perspectives carry weight. The Bank of England is proposed to focus more on the tokenization of deposits instead of launching central bank digital currencies.

Stablecoin issuance by banks is linked to risks such as triggering bank runs and facilitating money laundering, as noted by Bailey’s strategy, hinting toward further regulatory developments potentially influencing the cryptocurrency landscape. Market dynamics could evolve with stricter supervision envisaged by Bailey.

“Stablecoins, if issued by banks, could trigger bank runs and facilitate money laundering, significantly threatening the financial system. The Bank of England should focus on the tokenization of deposits rather than launching either a central bank digital currency (CBDC) or centralized digital fiat currencies.” — Andrew Bailey, Governor, Bank of England and FSB Chairman.

Europe’s Stablecoin Concerns and Global Implications

Did you know? Andrew Bailey’s position reiterates historical doubts, reminiscent of concerns that emerged during Facebook’s Libra initiative, which ultimately led to its cancellation.

According to CoinMarketCap, Ethereum (ETH) currently trades at $2,962.95, with a market cap of $357.67 billion, gaining 15.5% over the last week. The circulating supply reaches 120.71 million, reflecting significant upward movement over 90 days at 82.28%.

The Coincu research team suggests that policy divergences between Europe and the U.S. could reshape regulatory landscapes, altering financial mechanisms. Historical caution against unregulated digital assets continues amplifying amid rapidly evolving crypto ecosystems.