Andrew Bailey, governor of the Bank of England, has stressed that before they can function as money, stable coins “will need to have the characteristics of a currency and be regulated”. Bailey described crypto as a “highly speculative investment” with no intrinsic value.
Stablecoins are meant to be money
According to Andrew Bailey, governor of the Bank of England (BOE), stable coins can only function as money if they possess the characteristics of “intrinsic money” and when they are regulated as such. Bailey also claimed that the BOE determined that the stablecoin lacked the “certain value” that the public has come to expect to see in digital money.
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Bailey, who did not directly mention the collapse of Terra’s stablecoin UST in 2022, suggested that speech At the Institute of International Finance, that public trust in this type of digital money is “essential to underpinning financial stability.”
The BoE chief also used his April 12 speech to explain how the central bank currently defines money. According to Bailey, if an asset is viewed as a store of value or a method of payment, such an asset will be viewed as money.
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According to the Governor’s clarification, money can also be defined using terms such as internal money which is essentially commercial bank money and external money which is actually central bank money. Although their use as a payment method has increased, Bailey states that until they acquire the characteristics of money, stable coins only “least claim to be money as a means of payment. “
‘Highly speculative investment’
Regarding what he called “unbacked crypto,” Bailey reiterated his claim that such digital assets cannot function as money.
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“Money requires stability of value to fulfill its function as a means of payment. This is clearly not true of unbacked crypto. It can be a bet, a highly speculative investment or a collectible , but note that it has no intrinsic value, so buyer be very aware,” the BOE governor explained.
Addressing the recent banking crisis triggered by the collapse of Silicon Valley Bank, the BOE governor stressed the need to “re-think the safety of internal funds”, particularly at smaller banks.
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