The governor of the Bank of England (BOE), Andrew Bailey, suggested that Stablecoins could reduce the dependence of the United Kingdom in commercial banks, indicating a potential change in the central bank’s position towards digital assets.
In an article on Wednesday at the Financial Times, Bailey said that the current financial system combines the creation of money and credit through the fractional reserve bank, in which banks have a part of deposits while lending the rest. Fractional reserve bank is a system in which banks have only a fraction of customer deposits in reserve and lend the rest, thus creating a new money through credit expansion.
“Most of the assets that support the money of the commercial bank are not free of risks: they are loans for individuals and for companies,” Bailey wrote in the FT. “The system does not have to organize like that.”
Bailey said it is possible, at least partially, “separating money from the provision of credit.” In this system, banks and stable would coexist, while non -banking would carry out a most of the credit provision role. Even so, Bailey warned that “it is important to consider the implications of such a thorough change before moving forward.”
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RACE OF THE INDUSTRY IN THE LIMITS OF STABLECOIN
Bailey comments follow criticism of the Posture of the Bank of England on Stablcoins by the defense groups of the cryptocurrency industry based in the United Kingdom. The organizations criticized a BOE plan that would establish individual limits for Stablecoin holdings.
According to the industry groups, the implementation of the limit would be a challenge and expensive, which could leave the United Kingdom behind other jurisdictions in the Stablecoin field. Tom Duff Gordon, Vice President of International Policy in Coinbase, said that “no other important jurisdiction has considered it necessary to impose limits.”
Even so, Bailey comments could involve a change of direction. He clarified that his approach is in the massive adoption of Stablecoin for payments and settlements. The current stable and cryptocurrencies, he said, still do not qualify.
Related: United Kingdom to strengthen ties with us in cryptographic matters: Report
Stablecoins to have accounts of the Bank of England
In his FT article, Bailey said the bank will publish a consultation document on the systemic stable regime of the United Kingdom in the coming months. This new regime would be applied to Stablecoins for its use as money, as explained, “for daily payments or to resolve the tokenized central financial markets.”
He came to point out that “the stable of the United Kingdom widely used should have access to accounts in the [Bank of England] To reinforce your status as money. “This movement, Bailey explained, is crucial to create a regime that guarantees that the United Kingdom can reap the benefits of the stable while assembling financial stability.
The comments follow Bailey’s warning against banks that are issued by Stablecoins in the mid -Yuly, saying that the BOE should focus on tokenizing deposits instead. Ensuring that Stablecoins has accounts in the Central Bank seems to be an indirect form for the BOE to touch its deposits.
Stablecoins needs to evolve
Despite its opening towards Stablecoins, Bailey said that some characteristics “would require scrutiny” and that bank assets should be risk free. In addition, he suggested that the stable require insurance against operational risks, such as hacks, as well as standardized exchange terms.
He said that “it should also be possible to have innovation in the form of money” and consistently “, therefore, it would be a mistake to be against Stablecoins.” Instead, he recognizes his “potential to boost innovation in payment systems.”
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