Hype too often influences policymakers when it comes to regulating markets. So it was reassuring to hear Andrew Bailey, the governor of the Bank of England, resist the momentum behind cryptocurrencies. In his July Mansion House speech, he reiterated his scepticism over the need for a “Britcoin” central bank digital currency or a UK stablecoin, with tokens issued by finance houses and backed by their sterling reserves. As Donald Trump signs stablecoins into US law and rebrands private dollars with political colours, Mr Bailey’s caution isn’t just prudent, it’s essential.
The governor’s view is that UK banks should not be allowed to issue their own stablecoins. Nor should the Bank effectively run Britcoin bank accounts without clear public benefit. These are not the views of a luddite, but of a regulator worried, correctly, about creating a new class of imprudent assets. The key question is not whether new technologies can be adopted in finance, but whether they should be – especially when the consequences of failure could affect the wider economy.
