Andrew Bailey, the Governor of the Bank of England, has stated that stablecoins “will have to have the characteristics and be regulated as internal money” before they will function as money. Bailey also described cryptocurrencies as a “highly speculative investment” with no intrinsic value.
Stablecoins pretend to be money
According to Bank of England (BOE) Governor Andrew Bailey, stablecoins can only function as money if they achieve the characteristics of “internal money” and when they are regulated as such. Bailey also claimed that the BOE had determined that stablecoins lack the “guaranteed value” that the public expects to see in digital money.
Bailey, who did not directly address Terra’s UST stablecoin collapse in 2022, suggested in his speech at the Institute of International Finance, that public confidence in this type of digital money is “necessary 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 looks like a store of value or a method of payment, that asset will look like money.
According to the governor’s explanation, money can also be defined using terms like inside money, which is essentially commercial bank money, and outside money, which is actually central bank money. Although their use as a payment method has grown, Bailey said that unless they take on the characteristics of money, stablecoins will only “pretend to be money at least as a means of payment.”
‘Highly Speculative Investment’
Regarding what he called “unbacked cryptocurrencies,” Bailey reiterated his assertion that such digital assets cannot function as money.
“For money to fulfill its function as a means of payment, it requires stability of value. This is clearly not true for unbacked cryptocurrencies. It can be a bet, a highly speculative investment or a collectible, but keep in mind that it has no intrinsic value, so the buyer must be very attentive, “explained the governor of the BOE.
Addressing the recent banking crisis sparked by the collapse of Silicon Valley Bank, the BOE governor stressed the need to “review insider money protection,” particularly at smaller banks.
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