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Widely-used stablecoins need to be regulated like money, BoE's Bailey says
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Widely-used stablecoins need to be regulated like money, BoE's Bailey says
Any stablecoin that becomes widely used as a means of payment in Britain needs to be regulated like money in a standard bank, Bank of England
Governor Andrew Bailey said on Wednesday, meaning it would need depositor protections and access to BoE reserve facilities.
The comments made in an article in the Financial Times newspaper represent a slight shift in tone by Bailey, a long-standing sceptic of cryptocurrencies.
He said it would be "wrong to be against stablecoins as a matter of principle", but he also said their main current use as a way to enter and exit cryptocurrency trades did not amount to a standard money-like means of payment.
Bailey confirmed the BoE would publish a consultation paper on stablecoins in the coming months.
"In doing so, we will set out that widely used UK stablecoins should have access to accounts at the BoE in order to reinforce their status as money," he said.
He also raised the possibility of "banks and stablecoins coexisting and non-banks carrying out more of the credit provision role", but said that such a shift would need careful consideration.
Stablecoins are digital tokens designed to keep a constant value. They are often backed by traditional assets such as the U.S. dollar or government debt.
They have surged in popularity and their demand is expected to increase further after the U.S. passed its GENIUS Act in July that sets federal rules for stablecoins.
In an interview with The Times newspaper, also in July, Bailey said the technology risked pulling money out of the banking system and undermining credit creation.
Crypto industry figures have expressed concern about the BoE's caution and say issues include caps on stablecoin holdings the BoE has proposed, the share of backing assets eligible to earn interest, and the criteria the BoE will use to determine which stablecoins fall under its remit.
In Wednesday's article, Bailey said stablecoins should be risk-free with backing assets, protected by insurance and resolution schemes, and readily exchangeable for cash without relying on crypto-currency exchanges.
