Money, Not Crypto: The BoE’s Systemic Stablecoin Blueprint

The Governor of the Bank Of England, Andrew Bailey in the FT sets out a systemic stablecoin regime that is open to innovation but anchored in money-like standards. The Bank of England’s three tests are clear: (1) risk-free backing assets; (2) deposit-style protection—insurance and a statutory resolution placing holders as preferred creditors; and (3) direct, uniform 1:1 convertibility into fiat, not reliant on crypto exchanges.

The policy goal is continuity of the “par” promise across cash, deposits, and tokens. But the transition carries risks. If stablecoins scale, deposits could shift to narrowly backed tokens. That may weaken bank funding, push credit intermediation to non-banks, and complicate monetary policy transmission. It also raises operational, governance, and cyber risks that insurance and resolution need to address in detail.

The notable step is the proposal that widely used UK stablecoins should access BoE accounts. That would provide central-bank settlement and strengthen parity, but it also creates design choices on access, supervision, caps, and contingency tools to avoid unintended disintermediation.

A BoE consultation will follow on standards for payments and tokenised market settlement. Europe should engage early: align definitions of “systemic” and “money-like,” set common requirements on backing, convertibility, and resolution, and design cross-border interoperability to reduce regulatory arbitrage.

My view: permit privately issued tokens to plug into public settlement only under conservative safeguards, phased implementation, and ongoing impact assessment on bank funding and policy transmission.