Andrew Bailey, the governor of the Bank of England, has asserted that stablecoins “will need to have the characteristics of, and be regulated as, inside money” before they function as money. Bailey also described crypto as a “highly speculative investment” with no intrinsic value.
Stablecoins Purport to Be Money
According to the Bank of England (BOE) governor, Andrew Bailey, stablecoins can only function as money if they attain the characteristics of “inside money” and when they are regulated as such. Bailey also claimed the BOE had determined that stablecoins lack the “assured value” the public expects to see in digital money.
Bailey, who did not directly refer to the collapse of Terra’s stablecoin UST in 2022, suggested in his speech at the Institute of International Finance, that the public’s confidence in this type of digital money is “needed to underpin financial stability.”
The BOE chief also used his April 12 speech to explain how the central bank currently defines money. According to Bailey, if something is seen as a store of value or a payment method then such an asset will be seen as money.
As per the governor’s explanation, money can also be defined using terms such as inside money which is essentially commercial bank money and outside money which is in fact central bank money. Although their use as a payment method has grown, Bailey said unless they acquire the characteristics of money stablecoins will only “purport to be money at least as a means of payment.”
‘Highly Speculative Investment’
Concerning what he termed “unbacked crypto,” Bailey reiterated his assertion that such digital assets cannot function as money.
“For money to fulfil its function as a means of payment, it requires stability of value. This is clearly not true of unbacked crypto. It could 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 sparked by the collapse of Silicon Valley Bank, the BOE governor stressed the need to “revisit the protection of inside money,” particularly in smaller banks.
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