Bank of England Governor Andrew Bailey warned global investment banks against developing their own stablecoins, highlighting possible threats to financial stability.
Speaking in an interview with The Times, Bailey took a stance that contrasts sharply with U.S. President Donald Trump’s administration’s support for crypto initiatives, which has fueled expectations of a friendlier regulatory climate in the country.
Bailey expressed skepticism about stablecoins, which are digital tokens tied to traditional assets like the dollar. He argued that stablecoins do not carry the same safeguards as conventional bank deposits and could siphon money away from the banking system, potentially weakening credit creation and monetary policy control.
“Stablecoins are proposed to have the characteristics of money,” Bailey said. “That money is a medium of exchange. Therefore, they really do have to have the characteristics of money and they have to maintain their nominal value. We are going to have to look at it very closely through that lens. It’s both a financial stability issue and a money issue in that sense.”
Instead, he encouraged banks to explore tokenized deposits, which digitize existing forms of money while keeping them firmly under regulatory oversight. Bailey hinted that the U.K. might be better off enhancing digital banking infrastructure than launching a central bank digital currency (CBDC), as the European Central Bank plans to do in the coming years.
His warnings arrive just as the U.S. Congress considers the Genius Act, a proposal to let commercial banks issue stablecoins. Institutions like JPMorgan and Citi are reportedly preparing for such moves, anticipating a surge in digital finance under looser rules. Cryptocurrencies like bitcoin have soared in value amid speculation over more lenient policies in the word’s largest economy.