Andrew Bailey on Stablecoin
TL;DR
Andrew Bailey believes widely-used stablecoins must be strictly regulated to mirror traditional money safeguards, including insurance and asset backing.
Key Points
He stated that stablecoins require an insurance scheme and a statutory resolution arrangement making holders preferred creditors in insolvency processes.
Andrew Bailey differentiates between unbacked crypto assets like Bitcoin and stablecoins, the latter needing to maintain nominal value to pass the test of singleness of money.
The central bank was planning to publish a discussion paper on the topic of stablecoins soon as of October 2025.
Summary
Andrew Bailey, Governor of the Bank of England, asserts that widely-used stablecoins need regulation comparable to that governing traditional money to ensure financial stability and public trust. He emphasizes that for these digital currencies to function acceptably, they must be backed by risk-free assets and be freely exchangeable for other forms of money, rather than solely through crypto exchanges. Furthermore, he has suggested that stablecoins should incorporate insurance mechanisms to mitigate operational risks, such as cyberattacks, a requirement he views as essential for fostering user confidence.
He recognizes the potential of stablecoins to drive innovation within payments, indicating a view that opposing them on principle would be misguided. However, his focus remains on ensuring they satisfy the "test of the singleness of money" by maintaining nominal value and being redeemable for central bank money. His position acknowledges that stablecoin issuers could coexist with traditional banks, provided robust regulatory standards around reserves, insurance, and insolvency are established, viewing this as a significant medium-term development for financial markets.
Key Quotes
trust in stablecoins requires an insurance scheme (as with bank deposits), and a statutory resolution arrangement that ensures their holders are preferred creditors in any insolvency process
Frequently Asked Questions
Andrew Bailey strongly advocates for a strict regulatory regime for stablecoins that are widely used. He believes they must be regulated like money, requiring them to be backed by risk-free assets and freely exchangeable. The Governor also suggested that insurance is necessary to cover operational risks like cyberattacks.
The Governor has reportedly softened his initial skepticism regarding a future role for stablecoins in the financial system. While maintaining strict regulatory requirements, he now recognizes their potential to drive innovation. This indicates a shift from outright opposition to conditional acceptance under stringent oversight.
The Bank of England Governor stated that stablecoins should be backed by risk-free assets, not just any assets. Furthermore, he emphasized they must be freely exchangeable with other forms of money, suggesting this exchange should not be limited only to crypto exchanges.