Andrew Bailey, the Bank of England governor has said that the bank is focusing on stable coins which are backed by real-world assets and not on other crypto-assets which are “dangerous” and “could be worth nothing.”
He said this during TheCityUK’s virtual annual conference. According to him, crypto-assets like Bitcoin have extrinsic value but they are highly unstable.
However, according to him, stable coins “have the potential to be systemic in terms of their importance for the financial system and its stability.” He added that stable coins can reduce lending rates and cause people to look elsewhere outside the banking system.
A Central Bank digital currency rather than a crypto asset
The bank supports a central bank digital currency that it says could enable anyone to make electronic payments. It says that the central bank’s digital currency could “make electronic money, issued by the Bank of England, available to all households and businesses.”
The bank also notes on its website that such a currency should be introduced alongside cash and bank deposits instead of replacing them.
But the bank has not launched any central bank digital currency. It is in the process of consultation on the same issue. It is likely therefore that they will issue a central bank digital currency that is stable in value.
Further, the bank has launched a consultation on regulation of private cryptocurrencies.
Bailey said the bank will “inevitably” adopt a “tough love” approach when making crypto regulations to ensure innovation does not ignore the public interest. He added that the bank will use the regulation to protect financial stability and public confidence in money. This is not the first time Bailey is expressing his resentment for crypto assets.
“What we cannot have is a world where innovation gets a free pass to ignore the public interest. The odds of such an approach not ending well are too high,” he said.
According to him, crypto innovations can challenge existing rules but public interest should be the main concern. He said although the tough measures will disappoint some, he was confident it will result in a robust form of innovation.