Crypto and Stablecoins Are Not Money, Says Bank of England Governor in Favor of ‘Enhanced Digital Money’
Andrew Bailey, Governor of the Bank of England (BoE), reiterated his stance against cryptocurrencies, during his recent speech at the Mansion House in London.
Bailey, who previously voiced concerns about the speculative nature of cryptocurrencies, said on Monday that Bitcoin has “no intrinsic value and it’s highly volatile.” He also noted that crypto assets such as Bitcoin (BTC) are “best treated as extremely speculative investments.”
Bailey further added that stablecoins such as Tether (USDT) and USD Coin (USDC) “are not robust.”
“[Stablecoins] do not meet the standards we expect of safe money in the financial system. In particular, both fail the basic tests of singleness and settlement finality. They are not money.”
However, Bailey believes that the prospect of “enhanced forms of digital money” looks more promising.
Enhanced digital is most conveniently defined as a unit of money to which there is the capability to attach a lot more executable actions, for instance, contingent actions in so-called smart contracts, which could be simple or quite complex, he explained.
Recent events like the failure of a number of banks in the US and in Switzerland, and its consequences have raised questions over the singleness of money, Bailey added.
The remarks come after Bailey stressed in April that stablecoins, which are digital currencies pegged to the value of other assets like fiat, “purport” to be money but “do not have an assured value.”
His position on cryptocurrencies has been consistent, warning investors about the volatility and regulatory risks associated with these assets.
The collapse of Terra’s algorithmic stablecoin TerraUSD (UST) last year wiped out billions of dollars from the crypto market and prompted central banks and financial regulators to question the ‘stability’ of stablecoins.
Bank of England’s Retail CBDC Move
Last month, the BoE and the Bank for International Settlements (BIS) completed a year-long study into retail central bank digital currency (CBDC) payments, dubbed “Project Rosalind.”
From the Bank of England’s point of view, our main motivation for a retail CBDC would be to promote the singleness of money by ensuring that the public always has the option of going into fully functional central bank money that can be used in their everyday lives.
Bailey made it clear that the bank’s work on retail CBDC does not alter its commitment to issuing physical cash. “Cash is here to stay,” he added.
Recently, Tom Mutton, the head of the BOE’s CBDC project said in an interview, that the central bank is still considering which technology would underpin its CBDC.
Baily further said that the bank is receiving proposals to create digital money – ‘digital pound,’ in the form of stablecoins, issued by banks or non-banks.
“We will shortly set out proposals for regulating systemic stablecoins, under powers contained in the Financial Services and Markets Act 2023.”
