The Bank of England (BoE) Governor Andrew Bailey has elaborated on his views towards stablecoins and Central Bank Digital Currencies (CBDCs) at an annual City UK conference.
While reinforcing supportive comments reported on June 12, when he called CBDCs “one of the most fundamental innovations in the history of central banking,” the governor also warned that digital money opened up avenues of risk.
“We cannot ignore the risks that digital money is attractive for money launderers and cyber criminals,” he concluded in his speech on June 15.
Apart from his ending warning, Gov. Bailey’s speech was largely positive towards digital currency. As reports indicate, the BoE, alongside other central banks across the world, has been debating introducing a digital currency. In the UK’s case, a digital pound.
That said, neither the BoE nor the British government have made any concrete decisions about having their own CBDC. Chancellor Rishi Sunak first announced the launch of an exploratory task force into the matter back in April.
“New forms of digital money represent an important source of innovation” he said. “So we must evaluate whether and how they can meet our public interest objectives.”
Sunak continued by saying “Rather than use commercial bank money as the basis for transactions, providers of digital money would create and use their own money or ‘coin’. And, they could be issued by companies, including large technology platforms, with the capacity to scale up and grow rapidly.”
A distinction between stablecoins and crypto-assets
Gov. Bailey went on to draw a distinct line between stablecoins and crypto-assets such as bitcoin (BTC). He claimed that to term crypto-assets as cryptocurrencies is “misleading,” due to them having “no intrinsic value.”
“It can have extrinsic value, in the sense that people like to collect and own them, just as they like to collect and own all sorts of things,” he explained. “But that extrinsic value is highly unstable and could be nothing.”
Meanwhile, he stated that stablecoins could have intrinsic value. However, he also noted a public interest question of what it would take for stablecoins to be trusted as money.
“Any new form of digital money in order to succeed will need to be trusted as a store of value and as an accepted means of payment,” Gov. Bailey stated.
“Stablecoins must therefore promise, credibly and consistently, to be fully interchangeable with existing forms of money. In other words, they must be anchored in and thus maintain confidence in the monetary system.”