In the global landscape of financial systems, stablecoin occupy a central position today, but recent statements by the governor of the Bank of England have sparked a discussion on risks and prospects. Andrew Bailey has raised strong concerns about the potential systemic dangers arising from the issuance of stablecoin by banks. In an interview with The Sunday Times, Bailey emphasized the need to protect financial stability and state control over currencies.
Stablecoin and risks for the stability of the global financial system
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The growing interest in stablecoin reflects their role in the cryptocurrency ecosystem. These digital assets, whose value is pegged to fiat currencies like the dollar or the euro, facilitate the digital circulation of money and quick transactions even across borders. However, according to Andrew Bailey, stablecoin represent a systemic risk for banking institutions. The governor highlighted how widespread issuance of stablecoin by banks could negatively impact the functioning of the entire system, endangering the stability that central banks must ensure.
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Bailey emphasized how a massive spread of stablecoin could even lead to the loss of control by sovereign authorities over their own currencies. In fact, a parallel system would be created, where the power to issue and regulate money would escape the states, undermining the foundations of traditional monetary policy.
Priority of the Bank of England: tokenize deposits
While recognizing the innovation brought by stablecoins, Bailey proposes an alternative approach: instead of focusing on private stablecoins, the Bank of England should concentrate on the tokenization of deposits. With this solution, traditional bank deposits would be converted into digital representations on controlled blockchain platforms, thereby enhancing the security and traceability of transactions. According to Bailey, this strategy would allow for combining the advantages of technological innovation with the security offered by central banks.
The tokenization of deposits, in fact, preserves the central role of banks in the economy, avoiding the fragmentation and loss of state supervision typical of private stablecoins. Consequently, it ensures the continuity of control and oversight mechanisms to protect users and the system as a whole.
The position on Central Bank Digital Currency (CBDC)
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Andrew Bailey also spoke about CBDC (central bank digital currencies), a topic at the center of the debate in recent years. Surprisingly, the leader of the Bank of England stated that he does not intend to focus on his own centrally managed digital token. Bailey explained that, while other countries are considering the introduction of CBDCs, in the United Kingdom “there is no need” to launch a new digital currency, nor to replace traditional forms of money.
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This position stems from the belief that processes such as the tokenization of deposits can offer efficiency without losing stability-oriented control. The goal, according to Bailey, is to avoid the creation of new risks and protect national currency sovereignty.
The new role of Andrew Bailey at the Financial Stability Board
The influence of the governor of the Bank of England is not limited to Great Britain alone: Bailey has recently become the chairman of the Financial Stability Board (FSB). This new position strengthens his role as an international regulator with broad directive powers in the digital financial services sector.
In his role as leader of the FSB, Bailey is preparing to tackle the uncontrolled growth of stablecoins with determination. His action aims to prevent these solutions from altering global financial balances, facilitating global coordination among supervisory authorities and promoting shared standards to protect international stability.
Stablecoin: the positive side and the opportunities for emerging markets
Despite the risks mentioned by Bailey, stablecoin offer significant advantages, particularly in the field of international payments. They indeed allow breaking down the barriers of traditional banking infrastructure, offering a tool for transferring value that is agile, transparent, and often more economical. This promotes the democratization of access to major currencies worldwide, such as the dollar, the euro, and the yen, especially in developing countries and areas with underdeveloped banking services.
Geograficità estesa: facilitano transazioni globali senza ostacoli legati alle banche locali
Rapid payments: allow immediate transfers, useful for individuals and businesses
Traceable security: thanks to blockchain technology, every movement is recorded and verifiable
Cost reduction: they eliminate numerous intermediaries, reducing the fees
However, these very strengths are also a source of concern for the authorities: the freedom of movement of stablecoins risks weakening control over capital and macroeconomic policies.
Future prospects and regulatory impact
The warning from Andrew Bailey marks a crucial moment for the future of digital finance. The Bank of England favors paths that enhance innovation without compromising the security of the system. The debate remains open: on one side, there is the push towards greater efficiency in payments, on the other, the need to keep firm public control over the value of the currency.
The choice between private stablecoins and the tokenization of deposits does not concern only Great Britain, but involves all major economies and emerging markets. These decisions will determine how citizens, companies, and institutions will use digital assets in the coming years.
Stability and innovation: the global challenge of stablecoin
The intervention of the Bank of England and its governor represents a clear signal on the need to balance technological innovation and systemic stability. Stablecoins will continue to spark interest and controversy, but Bailey’s message calls for a pragmatic reflection: harness the advantages of digitalization, but without giving up the security measures built over decades of monetary policy.
The next moves of the regulatory bodies – starting with the Financial Stability Board – will define the framework within which stablecoin and digital instruments can develop. Investors, financial operators, and citizens will need to closely observe the regulatory evolution, ready to seize opportunities without neglecting new risks.
