Bank of England Governor Andrew Bailey has raised significant concerns about major banks issuing their own stablecoins, citing risks to financial stability, lending capacity, and potential for large-scale money laundering. In a Sunday Times interview, Bailey advocated for tokenized bank deposits—digital versions of traditional money—as a safer alternative that integrates with existing banking infrastructure.
Bailey, who chairs the Financial Stability Board (FSB), warned that stablecoins could trigger disintermediation, liquidity imbalances, and bank runs during market stress, akin to the FTX collapse. He emphasized that if stablecoins draw funds out of banking systems, it would reduce banks' lending capacity, undermining core monetary functions. His stance directly contrasts with U.S. policy under the Trump administration, which prioritizes stablecoin adoption through the GENIUS Act to cement dollar dominance.
The BOE governor also expressed skepticism about a UK central bank digital currency (CBDC), suggesting focus instead on digitizing commercial bank deposits. This aligns with European regulators' concerns that dollar-pegged stablecoins like the Trump-affiliated USD1 ($2.2B market cap) threaten euro sovereignty, prompting MiCA regulations to boost euro-denominated alternatives.
