Bank of England Governor and noted cryptocurrency skeptic Andrew Bailey has cautioned banks against issuing stablecoins, warning that they could pose significant risks to financial stability and the fundamental nature of money if left unregulated.
In an interview with The Sunday Times, Bailey expressed particular concern over plans by major investment banks—including JPMorgan, Citi, and Bank of America—to develop and issue their own stablecoins. He emphasized that stablecoins, which aim to function as a medium of exchange, must retain a stable nominal value and exhibit the same core characteristics as money.
“Stablecoins are being proposed to behave like money. But if they are to serve that purpose, they must truly function as money, which includes maintaining a stable value,” Bailey said. “We have to examine them very closely from both a financial stability and monetary control perspective.”
Bailey, who also chairs the Financial Stability Board, warned that stablecoins lack the protections and guarantees of traditional bank deposits. If widely adopted, he argued, they could siphon funds out of the regulated banking sector, weakening credit creation and undermining central banks’ ability to manage the economy.
He also raised alarms about the broader systemic implications, including the potential erosion of sovereign control over national currencies and the creation of unregulated links between crypto markets and the traditional financial system.
Rather than backing the use of stablecoins, Bailey urged banks to explore tokenized deposits—digital representations of traditional money issued by regulated financial institutions. He described this as a more prudent and sustainable path forward, one that preserves the core functions of the banking system while embracing the efficiency of digital payments.
“I would much rather see banks pursue tokenized deposits,” Bailey said, calling it a “more sensible” solution that balances innovation with financial integrity.
Globally, the stablecoin market has surged to approximately $255 billion, according to data from the Bank for International Settlements. The sector’s rapid expansion—dominated by dollar-backed stablecoins—has triggered a wave of regulatory responses worldwide.
In the U.S., lawmakers are advancing the Genius Act, which would establish a formal regulatory framework allowing commercial banks to issue stablecoins. Meanwhile, jurisdictions like China, Singapore, and the UAE have implemented or are developing rules to address the influence and risks associated with stablecoins.
As regulators around the world move to catch up, Bailey’s comments underscore growing concerns among central banks and financial authorities about the evolving role of private digital currencies in the global financial system.
