Bank of England (BOE) Governor Andrew Bailey suggested that Stablecoins could reduce the United Kingdom’s hope of commercial banks, which signed a potential transition to the central bank’s stance to digital ownership.
On a Wednesday article In the Financial Times, Bailey said the current financial system combines money and credit creation through fractional reserve banking, where banks hold part of the deposits while lending the rest. Fractional Reserve Banking is a system where banks hold only one part of customer deposits that provide and lend the rest, thus creating new money by expanding credit.
“Most assets that support the bank’s commercial currency are not at risk: they are loans to individuals and companies,” Bailey wrote to FT. “The system doesn’t have to be fixed like this.”
Bailey said it was possible, at least partially, “separate the money from taking the credit.” In this system, the banks and Stablecoins will be together, as non-bank will perform a greater portion of the paper that gives credit. However, Bailey warned that “it is important to consider the implications of such a change completely before continuing.”
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The industry pushing to stablecoin limits
Bailey’s comments follow Bank of England’s stance critism of Stablecoins Through the advocacy groups of the UK -based cryptocurrency industry. Organizations have criticized a BOE’s plan to set individual caps for stablecoin handling.
According to industry groups, the implementation of the limit will be difficult and costly, which potentially leave the UK behind other constituents in the field of Stablecoin. Tom Duff Gordon, vice-president of the Coinbase international policy, said “no other major scope has been considered necessary to impose caps.”
However, Bailey’s comments may indicate a change in direction. He made it clear that his focus was on the stablecoin mass for payments and repairs. Current stablecoins and cryptocurrencies, he said, have not yet qualified.
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Stablecoins to hold accounts in Bank of England
In his article on FT, Bailey said the bank would publish a role in consultation with the UK’s systematic Stablecoin regime in the coming months. This new regime will be applied to Stablecoins intended for use as money, as he explained, “for day -to -day payment or for repairing tokenised markets in the financial market.”
He went to note that “widely used UK Stablecoins should have access to accounts in (Bank of England) to boost their status as money.” This step, Bailey explained, is important in creating a regime that ensures that the UK can reap the benefits of stablecoins while maintaining financial stability.
Comments follow Bailey’s warning against banks released stablecoins In mid -July, saying that Boe should focus on tokenizing deposits instead. Make sure the stablecoins have central bank accounts appears to be an indirect way for the BOE to pokenize its deposits.
Stablecoins will have to change
Despite his openness towards Stablecoins, Bailey noted that some features “require a thorough investigation” and that banking assets should be at risk. Moreover, he suggested that stablecoins require insurance against operational risks, such as hacks, as well as standard exchange terms.
He said “there should also be a change in the form of money” and consequently “therefore wrong against stablecoins.” Instead he recognizes their “potential driving a change in payment systems.”
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