Writing in the Financial Times (FT) Wednesday (Oct. 1), Andrew Bailey said it would be “wrong to be against stablecoins as a matter of principle,” while arguing for their potential for “driving innovation in payments systems both at home and across borders.”
The FT points out in a separate report that Bailey had given a speech in July in which he said he didn’t view stablecoins a substitute for commercial bank money.
But on Wednesday, he wrote that the financial system “does not have to be organized” as it is now, with a heavy dependence on commercial bank lending to fuel the economy.
“It is possible, at least partially, to separate money from credit provision, with banks and stablecoins coexisting and non-banks carrying out more of the credit provision role,” Bailey wrote, adding that it was “important to consider the implications of such a change thoroughly before going ahead.”
Stablecoins, digital tokens pegged to a real currency like the U.S. dollar, have been the subject of heated debate among regulators, as the FT notes.
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Some caution that the coins present a threat to global financial stability, while others uphold them as a promising innovation that can lead to faster and cheaper payments.
There are nearly $300 billion worth of stablecoins in circulation, the report added, dominated by two U.S.-dollar-based coins — Tether’s USDT and USDC from Circle — with no pound-based stablecoins “of significant size.”
The U.K. central bank, the report continued, has faced criticism for taking a more cautious approach to stablecoins than its counterparts, especially after the U.S. adopted the GENIUS Act in July, paving a path for mainstream adoption of the digital assets on Wall Street.
In related news, trade association UK Finance and several financial institutions announced last week the launch of a pilot project they said will include the first U.K. live transactions of tokenized sterling deposits (GBTD).
As covered here, the pilot will cover three use cases for GBTD: person-to-person payments through online marketplaces, remortgaging processes and digital asset settlements, and run until the middle of next year.
“This project is a powerful example of industry collaboration to deliver next generation payments for the benefit of customers and businesses — and an opportunity for the U.K. to lead globally in setting standards for tokenized money,” UK Finance Managing Director Jana Mackintosh said in a news release.
