BoE’s Andrew Bailey Sounds Alarm: Stablecoin Surge Could Undermine Central Bank Dominance

Stablecoins aren't just disrupting payments—they're gunning for the throne.

The Bank of England governor fired a warning shot today, framing privately issued stablecoins as an existential threat to monetary sovereignty. No charts, no projections—just raw institutional panic dressed up as 'financial stability concerns.'

When central bankers start sweating, you know the tech's working.

Bailey's fear? A parallel financial system where Tether and its ilk bypass rate hikes, dodge capital controls, and—god forbid—actually settle transactions in under three business days. The horror.

One problem: markets move faster than parliamentary committees. While Threadneedle Street drafts another consultation paper, stablecoin volumes keep hitting record highs. Because nothing screams 'sound money' like a monetary policy that changes slower than a UK mortgage approval.

Game theory suggests this ends one way: CBDCs rushed out with all the elegance of a Brexit trade deal.

— Budgetrend (@budgetrend) July 3, 2025

In addition to this, Bailey also put forth the notion of the changing role of reserve currency, explaining how it has moved from backing currency convertibility to preserving financial stability as capital circulates in and out of a country.

Bailey cautioned, “Central banks need to carefully examine payment innovation based on stablecoins.”

Bailey, soon to lead the Financial Stability Board, has previously flagged potential threats regarding stablecoins and plans to address them soon.

: Best Meme Coin ICOs to Invest in July 2025

Adoption of Stablecoins Could Cause Digital Dollarisation

In the wake of the landmark legislation passed by the US Senate normalising the use of stablecoins, Bailey’s warnings come amidst growing concerns related to the wide adoption of the US dollar-backed stablecoin, which could cause digital dollarisation.

A striking contrast to this is the US Treasury Secretary Scott Bessant, hailing the stablecoin legislation as a step towards cementing the dollar’s reserve currency status worldwide, amidst concerns regarding the erosion of trust in the greenback’s reserve currency status.

“We need to watch carefully the evolution of payment forms and whether innovation here introduces fragility into what I WOULD call the ‘money system,” said Bailey.

He went on to point out during his lecture the need for authorities to carefully monitor any changes made to the structure of money, such as the introduction of privately issued stablecoins, that help mitigate any detrimental effects on monetary trust.

“If, for instance, stablecoins emerge as a new FORM of money, we have to decide how to ensure the singleness of money and therefore trust in money in this world, and what role the notion of reserve currency should play here,” he said.

He added, “The rise of stablecoins could raise questions about the purpose of official foreign reserves in major advanced economies today.”

: 10+ crypto Tokens That Can Hit 1000x in 2025

“Central banks could face the heat if stablecoins become a widely used form of payment without proper regulations”

Bailey mentioned that authorities should make efforts to clarify the role of reserve currencies since advancements in payment technologies might avoid traditional oversight.

Some analysts are of the opinion that the adoption of stablecoins without global coordination could split the financial system. Without regulations in place, privately issued tokens might circulate outside central control, making it harder to manage economies and keep cross-border finance stable.

Authorities are currently reviewing how stablecoins can remain reliable and legally compliant as questions arise regarding the inclusion of stablecoins into the financial monetary system or their existence outside of it.

: 9+ Best High-Risk, High-Reward Crypto to Buy in July 2025

Key Takeaways

• The role of a reserve currency has changed from backing currency convertibility to preserving financial stability


• Authorities should carefully monitor any changes made to the structure of money to mitigate any detrimental effects on monetary trust


• Some regulators think that stablecoins could potentially split the financial system