Bank of England Governor Warns of Stablecoin Risks to Financial Stability

Bank of England Governor Andrew Bailey has issued a stark warning about the dangers posed by stablecoins to global financial stability. In an interview with The Sunday Times, the central bank chief cautioned that these digital assets could undermine sovereign control over money and introduce unregulated linkages between crypto markets and traditional finance.

Bailey specifically advised against banks issuing stablecoins, citing their potential to remove liquidity from the regulated banking system. "Stablecoins are proposed to have the characteristics of money," he noted. "They really do have to have the characteristics of money, and they have to maintain their nominal value." The governor emphasized this requires rigorous scrutiny through both financial stability and monetary policy lenses.

The comments come as several major investment banks explore launching their own stablecoins. Bailey, who chairs the Financial Stability Board, expressed particular concern about these plans, arguing stablecoins lack the protections of traditional bank deposits while threatening credit creation mechanisms.