Bank of England Governor Andrew Bailey expressed skepticism about the role of central banks’ digital currency (CBDC) in financial stability, highlighting that central banks must manage financial communication through the banking system. .
Speaking at the Chicago Booth Booth Business School in London on February 11, Bailey reinforced that while financial markets are evolving, the principles that support money issuance and liquidity must remain the same.
Bailey highlighted the increasingly important role of non-banking financial institutions (NBFIs) in global finance, urging central banks to adapt their risk management framework. However, he made it clear that this shift does not guarantee an increase in central bank access to money beyond traditional banks.
“They don’t make money, so there’s no basis for standing facilities for non-banks.”
Bailey said the introduction of digital pounds signalled that it would not change BOE’s core approach to financial stability.
Damage commercial banks
Bailey is exploring CBDCs to modernize payments and financial infrastructure, with several major economies, digital currencies issued by the Bank of England must preserve existing financial frameworks He emphasized.
Bailey confirmed that the Bank of England is still working with the UK government to study the feasibility of the digital pound. However, he stressed that while digital technology offers new possibilities for payments, the decision to introduce CBDC must be based on clear economic benefits rather than speculative trends.
Bailey said:
“If it proves necessary, you need to have it.”
He acknowledged that the digital pound could serve as an additional payment option, but he warned against undermining the fundamental role of commercial banks as an intermediary.
Bailey also emphasized that central bank liquidity concepts should remain bank-centric. He strengthened that the CBDC is not intended to supplement the system, rather than replacing private financial institutions.
According to Bailey:
“The permanent provision of liquidity to support the so-called money celibacy will only go to the bank.”
In January, the Bank of England announced plans to launch a “Digital Pond Lab” later this year as part of the exploration phase to determine potential designs and use cases for the UK CBDC.
Bailey’s stance suggests that the Bank of England remains open to advances in digital currency, but will not introduce CBDC without comprehensive regulatory safeguards or expand its stupid adoption I’m doing it.
Stubcoin needs to meet “Hiber”
Bailey also discussed Bitcoin (BTC) and Stubcoin during his speech. He characterized Bitcoin simply as a speculative asset, acknowledging that stablecoins could serve some financial functions.
However, he warned that if stubcoins operate within the payment ecosystem, they must meet the “hiber” of regulations.
Bailey’s remarks come amid growing debate over stubline regulations, especially as the Bank of England and the UK government continue to assess its role in digital finance. He repeated that while stubcoins are backed assets, they also exhibit similar properties to mutual funds, making them more opaque than traditional money.
Bailey said:
“I think we need to set a high bar there because there’s an expectation that people who use things to pay will be set up properly like money.”
His comments follow the recent global shift in regulatory approaches to crypto assets. Bailey has acknowledged that President Donald Trump’s pro-cryptic US elections can restructure global regulatory dynamics, but it remains unclear what concrete reforms his administration will pursue. He pointed out.
According to Bailey:
“The Biden administration, particularly the SEC, was in a situation where they were unable to obtain a regulatory framework and were using actions through courts. That was frankly becoming more challenging, and therefore consistent regulation. There is a gap in that it has a framework for that, but I don’t know what that will happen.”
