Bailey doesn’t understand why people would choose Bitcoins over stablecoins.
The governor of the Bank of England (BoE) honored a virtual conference organized by the Brookings Institute and in that meeting, he aired his views about crypto assets. He said they are “unsuited to the world of payments.”
When asked to talk about Bitcoins and stablecoins, he said that the problem with BTC is that it does not function as money.
He also said that it is unwise to invest in BTC because of its fluctuating price.
The governor’s choice may be the same with the teeming investors supporting innovations for other methods of payments. The governor happened to be more in favor of stablecoins because they lower payment friction. However, he gave this caution:
“If stablecoins are to be widely used as a means of payment, they must have equivalent standards to those that are in place today for other forms of payment types and the forms of money transferred through them.”
The governor was also concerned that people are getting stable coins without any legal claim. He said: there is “need to offer coin-holders a robust claim, with supporting mechanisms and protections to ensure they can be redeemed at any time 1-to-1 into fiat currency.”
According to Bailey, it is better for stablecoins to portray single currencies rather than multi-currency. This is in order to ensure that the stablecoin is more accepted globally:
“But a global stablecoin is a cross-border phenomenon. It can be operated in one jurisdiction, denominated in another’s currency and used by consumers in a third. The regulatory response must match this. As in banking and traditional payment systems, the regulatory response must be grounded in internationally agreed standards. Global issues require a global response, particularly for multi-currency stablecoins intended for cross-border transactions.”
Three months ago, the Bank of England received a proposal from blockchain firm L3COS for the provision of a CBDC.
The central bank’s management is in no position to frustrate the development of CBDCs. Instead, it acknowledges that CBDCs will take over the form of money in the future and will help the bank to accomplish its plans to stabilize the economy.