- The Bank of England’s governor has cautioned major banks against issuing their own stablecoins.
- Standard Chartered, headquartered in the UK, and several other large banks are exploring or have launched stablecoin projects.
- The governor prefers banks use tokenized deposits because these support lending, unlike stablecoins that require reserves.
- There are concerns that stablecoins may threaten the stability and uniform value of national currencies, especially if they lose their peg.
- The UK’s approach to regulating stablecoins differs from the United States, where recent policy is more supportive.
Andrew Bailey, Governor of the Bank of England, has warned major global banks not to launch their own stablecoins. His statement was made in an interview with the UK newspaper The Times. His comments come as some of the world’s largest banks, including Standard Chartered, pursue stablecoin initiatives.
Standard Chartered, based in the UK and regulated by the Bank of England, recently shared plans to issue a stablecoin in Hong Kong. Other major banks such as Société Générale through its subsidiary FORGE, Deutsche Bank via asset management arm DWS, and banks like Santander and ING are either active or exploring projects in this space. Some are still in early stages and have not made official announcements.
Bailey said he prefers banks focus on tokenized deposits rather than stablecoins. Tokenized deposits are digital forms of traditional bank deposits that use blockchain technology. Unlike stablecoins, which require banks to hold customer funds separately and cannot be used for lending, tokenized deposits keep supporting the bank’s lending activities. Bailey noted that restricting credit by tying up reserves for stablecoins could negatively impact economic growth.
He also expressed concerns about the stability of stablecoin values. Bailey referenced a recent Bank for International Settlements (BIS) paper, highlighting the risk that stablecoins could undermine the “singleness of money,” meaning that a unit of currency should always have the same value. “It’s both a financial stability issue and a money issue in that sense,” Bailey stated, noting that any loss of stablecoin value could trigger the rapid sale of government bonds, which are vital for financial markets.
Bailey currently chairs the global Financial Stability Board. His concerns about stablecoins and financial risk are shared by many central banks worldwide. However, in places like the United States and South Korea, authorities have struggled to implement strict oversight of stablecoin issuers.
The Bank of England will be a primary regulator for significant stablecoin operations in the UK. This approach puts the UK at odds with recent U.S. policy, where an executive order from President Trump and the Senate-passed Genius Act have signaled support for stablecoins. In the U.S., policymakers see stablecoins as a way to increase demand for Treasury bills and reduce debt servicing costs.
As stablecoin development continues globally, the divide between regulatory attitudes in the UK and other countries like the U.S. remains notable. The future of bank-issued stablecoins and their regulation will depend heavily on responses from both financial authorities and the banking sector.
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