Bank of England (BOE) Governor, Andrew Bailey, has stated that stablecoins must possess the characteristics of “inside money” and be regulated as such before they can function as money. Bailey also referred to crypto as a “highly speculative investment” that lacks intrinsic value. Bailey’s comments were made during his speech at the Institute of International Finance, where he also explained how the central bank defines money.
Bailey stated that if an asset is seen as a store of value or a payment method, it will be considered money. Money can also be defined as inside money, which is commercial bank money, and outside money, which is central bank money. Bailey added that unless stablecoins acquire the characteristics of money, they will only “purport to be money at least as a means of payment.”
Bailey’s comments come after the collapse of Terra’s stablecoin, UST, in 2022. While he did not directly refer to this event, Bailey suggested that the public’s confidence in digital money is necessary to underpin financial stability. Bailey also reiterated his claim that unbacked crypto cannot function as money, as it lacks stability of value. He stated that unbacked crypto could be a bet, a highly speculative investment, or a collectible, but it has no intrinsic value.
Bailey also stressed the need to “revisit the protection of inside money,” particularly in smaller banks, in response to the recent banking crisis sparked by the collapse of Silicon Valley Bank. Bailey’s comments highlight the BOE’s cautious approach to digital currencies and its commitment to ensuring financial stability in the face of emerging technologies.
Terence Zimwara, an award-winning journalist, author, and writer from Zimbabwe, reported on Bailey’s comments. Zimwara has written extensively on the economic troubles of African countries and how digital currencies can provide an escape route for Africans. The article includes a disclaimer that it is for informational purposes only and does not provide investment, tax, legal, or accounting advice.