Bank of England Governor Andrew Bailey has openly pushed back against the growing support for stablecoins coming from the Trump administration in the United States. In a recent appearance, Bailey warned about the risks posed by private banks issuing stablecoins and instead advocated for digitized versions of traditional bank deposits.

Bailey prefers the development of tokenized deposits—digital equivalents of standard bank accounts—over privately-issued stablecoins that are typically pegged to fiat currencies like the U.S. dollar or the British pound. He cautioned that widespread adoption of stablecoins could drain capital from the traditional banking system and weaken the banks’ ability to lend, potentially undermining financial stability.

🗣️ “The UK should respond to the rise of stablecoins by focusing on digitized deposits rather than launching its own central bank digital currency,” Bailey said.

At Odds with Trump’s Direction

While the UK is taking a cautious approach, the U.S. under President Donald Trump is heading in the opposite direction. The Trump administration is preparing legislation to allow commercial banks to issue stablecoins and to establish a regulatory framework for dollar-backed digital assets. Among these is USD1, a stablecoin tied to Trump-aligned figures, which has already reached a market cap of $2.2 billion.

Bailey warns that without proper oversight, stablecoins could trigger rapid sell-offs of their reserve assets during a crisis—much like modern-day bank runs—creating new systemic risks.

As the newly appointed chair of the Financial Stability Board (FSB), Bailey is also calling for global regulatory coordination to prevent such instability as digital finance evolves.

Digital Pound? Not So Fast.

Bailey has also pushed back on the idea of introducing a central bank digital currency (CBDC)—the so-called digital pound. Although the Bank of England has conducted extensive research on the concept, Bailey now believes similar outcomes can be achieved through supporting tokenized commercial bank deposits.

This stance contrasts with that of the European Central Bank, which is actively piloting a digital euro, and the People’s Bank of China, which has already rolled out its digital yuan across several regions.

Bailey noted:

“I’d much rather see banks explore tokenized deposits and ask how we digitize our money—particularly when it comes to payments. The U.S. is heading toward stablecoins, the ECB is pursuing CBDCs—yet no one is focusing on digitized deposits.”

Finance at a Crossroads

This debate over stablecoins comes at a pivotal moment for digital finance. With blockchain-based innovations gaining ground in the traditional financial system, regulators are trying to strike a balance between innovation and the preservation of systemic safeguards.

As the U.S. moves toward a looser regulatory regime that favors crypto-friendly solutions, UK policymakers may soon face pressure to keep pace or double down on stricter oversight. For now, Bailey is making it clear: Britain won’t follow blindly.



#Stablecoins , #DigitalFinance , #DigitalAssets , #USD1 , #CBDC

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