Bank of England Governor Andrew Bailey has hinted that stablecoins could one day share the same status as traditional money, opening the door to an alternative model where digital tokens reduce the role of commercial banks in daily payments.
Speaking through an op-ed in the Financial Times, Bailey questioned whether the century-old system of fractional reserve banking – where deposits are used to fund loans while only a fraction is held in reserve – remains the best framework. He argued that it’s possible to separate the function of creating money from that of providing credit, a move that could pave the way for non-bank players and tokenized currencies to assume greater responsibility in settlement and payments.
Bailey’s remarks mark a softer tone compared to his earlier skepticism. Over the summer, he urged caution on banks issuing their own stablecoins, favoring tokenized deposits instead. Now, however, he appears open to giving regulated stablecoins access to Bank of England accounts, a move that would reinforce their legitimacy as a means of payment. The central bank intends to publish a consultation paper later this year outlining how systemic stablecoins could be integrated into the UK’s financial framework.
This shift comes amid mounting criticism from crypto industry advocates, who warned that proposed caps on individual stablecoin holdings could cripple innovation and make Britain less competitive. Coinbase’s Tom Duff Gordon said such restrictions would set the UK apart from every other major jurisdiction, calling them both impractical and unnecessarily costly.
Bailey acknowledged that stablecoins are not yet ready for mass adoption, but emphasized their potential. He described them as “a new form of private money” that, with proper safeguards, could coexist with cash, cards, and other payment instruments. Those safeguards, he stressed, must include risk‑free reserves, protection against operational failures, and standardized exchange rules.
For Bailey, the bigger picture is about fostering competition and innovation in payments. By pushing traditional providers to improve speed, lower costs, and enhance efficiency, stablecoins could serve as a catalyst for change. In his view, dismissing the technology outright would mean ignoring one of the most promising developments in modern finance.
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.