Bailey backs regulation with BoE consulting on stablecoins regime

Bank of England Governor Andrew Bailey said Wednesday that the United Kingdom should embrace stablecoins as part of its financial system while subjecting widely used tokens to regulation comparable with traditional money. Bailey wrote that the central bank will publish a consultation on a stablecoin regime in the coming months and that widely used UK stablecoins should be able to hold accounts at the Bank of England to reinforce their status as money.

Stablecoins are digital assets pegged to a fiat currency and are intended for stable value and everyday payments, unlike more volatile cryptocurrencies. Bailey argued that digital assets and physical money can coexist and that the existing model, in which money creation and credit provision are tightly linked through banks, is not the only possible arrangement. He said it is feasible to at least partially separate money from credit provision, allowing banks and stablecoins to operate alongside one another while nonbank entities assume a greater share of lending.

Bailey cautioned, however, that such a shift would carry significant implications and must be examined carefully. He set out several regulatory priorities, including...