BOE Governor Warns of Financial Stability Risks from Private Stablecoins

Bank of England Governor Andrew Bailey has raised alarms over banks issuing their own stablecoins, citing systemic risks to the financial system. In an interview with The Sunday Times, Bailey advocated for tokenized bank deposits as a safer alternative, emphasizing their alignment with existing banking practices. "I WOULD much rather [banks] go down the tokenized deposit route," he said, highlighting concerns that stablecoins could divert funds from traditional credit creation.

The stablecoin market has surged from $125 billion to $255 billion in less than two years, according to a recent BIS report. Bailey, newly appointed chairman of the Financial Stability Board, also dismissed the need for a UK central bank digital currency, arguing instead for digitizing deposits. His stance contrasts with the US and ECB's more open approaches to crypto innovation.