Bank of England’s governor, Andrew Bailey, has expressed criticism towards the future use of stablecoins as a regulated form of money. He noted that the Central Bank Digital Currency (CBDC) should be the perfect currency for such.
He was responding to the opinion of some cryptocurrency enthusiasts who claimed that stablecoins are better alternatives to CBDCs. The governor also stated that the BoA is not convinced that volatile crypto “stablecoins” have any safe use as a legal tender.
According to him, if cryptocurrencies and stablecoins make their way fully into the world’s money system, it could result in grave damage to the global financial system.
According to Bailey,
Crypto assets have all the potential to be a threat to financial stability which is why we think we do need to take action.
Stablecoins Are More Volatile Than Fiat Currencies
Stablecoins are generally pegged to another less volatile asset, such as fiat currency. They are meant to provide a safer way for investors to enter the cryptocurrency market. However, Bailey has faulted its use as safe money instead of the traditional currencies or their digital versions.
He added that stablecoins do not offer enough stability to the economy. Although stablecoins are designed to provide more safety they are still far risky and more volatile than the US dollar or other fiat currencies.
Regulators Are Looking To Have More Control Over Stablecoins
Bailey is not the only one raising concerns about the stability of stablecoins. Some lawmakers and regulators have voiced their concerns about the financial stability attached to the technology behind stablecoins. As a result, they are calling for a strong regulatory framework on the assets.
The US Treasury Department stated recently that it would have legal power over stablecoins like Tether (USDT). As a result, it had instructed the US Securities and Exchange Commission (SEC) that it could set up a set of guidelines on the regulation of these assets. Both agencies are looking to establish a clearer framework that can regulate the crypto industry in the US.
The Monetary Authority of Singapore (MAS) has remained positive toward the cryptocurrency industry. However, the authority wants a proper regulatory structure for the industry, adding that digital assets such as stablecoins could have a very important role to play in future finance.
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