BOE Governor Andrew Bailey Opposes Stablecoins, Favors Tokenized Deposits

• Bank of England’s Andrew Bailey warns banks against issuing private stablecoins directly.
• Bailey backs tokenized bank deposits as a safer option than CBDCs or private stablecoins.
• UK’s cautious stance contrasts with the US’s support for stablecoins under new legislation.

Global tensions over digital currencies are intensifying as stablecoins gain momentum. Bank of England Governor Andrew Bailey has issued a strong warning to global banks. His message comes as institutions rush to develop private digital currencies. But Bailey sees risks in allowing private firms to issue stablecoins unchecked.

In a recent interview, Bailey urged banks to avoid stablecoin issuance. He called for a focus on tokenized deposits instead. These are digital versions of money already held in commercial bank accounts. Bailey’s statement signals a more cautious direction for the UK. It also contrasts sharply with recent moves in the United States.

Bailey Warns of Systemic Risk

Bailey believes stablecoins could destabilize global financial systems. He said private tokens may cause governments to lose control over monetary policy, which could lead to bank runs and fast withdrawals if people lose confidence.

He noted that funds may flow out of banks toward digital alternatives. This shift could harm lending and liquidity. Bailey also opposes launching a UK central bank digital currency (CBDC), known as the “digital pound.” Instead, he supports digitizing existing deposits at banks. This would preserve monetary control while still improving payment efficiency.

His remarks come as stablecoins grow in popularity. These digital tokens are often backed by dollars or euros. They allow instant global payments without relying on traditional banks. But critics say they could introduce new risks if poorly regulated. Bailey said he wants the UK to lead on responsible innovation. He warned that regulators must act before stablecoins spread too widely.

UK, US, and China Take Different Paths

Bailey’s comments highlight growing division in global digital asset policy. While the UK urges caution, the United States is embracing stablecoins. Under President Trump, U.S. officials have promoted dollar-pegged stablecoins. In March, U.S. Treasury Secretary Scott Bessent backed stablecoins at a White House event. He said they could extend U.S. dollar dominance. The tokens are often backed by U.S. Treasury bills, making them highly liquid and easy to regulate.

The U.S. Congress recently advanced the GENIUS Act, a bipartisan bill aimed at creating clear regulatory guidelines for stablecoins. The legislation supports innovation while enforcing strong compliance measures for issuers. Its passage could further solidify the U.S. lead in digital asset regulation, contrasting the UK’s cautious stance under Governor Bailey.

Federal Reserve Chair Jerome Powell has also supported a clear framework for stablecoins. Legislation is advancing to let banks issue them under federal oversight. Meanwhile, the European Union and China are going another way. The European Central Bank is testing a digital euro. The People’s Bank of China has rolled out the digital yuan in multiple regions.

Related: Stablecoin Giants Rival Nations in Gold and Treasury Power

Bailey said neither the U.S. nor Europe is exploring tokenized deposits. He argued that this model offers fewer risks than both stablecoins and CBDCs. Bailey’s stance places the UK at a crossroads. Should it follow the U.S. in supporting private innovation? Or stay cautious to protect its financial system?

The Bank of England has studied digital money since 2020. But no CBDC has been approved. Bailey’s remarks now suggest a slowdown in those efforts. His vision sees commercial banks issuing digital versions of traditional accounts. These could offer instant transfers without creating a separate digital currency.

For now, the UK remains cautious. Bailey’s warning signals that stablecoins won’t move forward without strict oversight. But as global adoption grows, that position may soon face pressure.

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