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BOE governor trashes crypto, stablecoins in favor of ‘enhanced digital money’

BOE governor trashes crypto, stablecoins in favor of ‘enhanced digital money’


Bank of England (BOE) governor Andrew Bailey delivered a speech July 10 in which he moved smoothly from the central bank’s efforts to control inflation and maintain public trust in financial institutions to why cryptocurrencies are not money. Instead of cryptocurrencies and stablecoins, he would prefer “enhance digital money.”

The spate of bank failures in the United States and Switzerland earlier this year revealed issues of the singleness of money and settlement finality, Bailey said. Both cryptocurrency and stablecoin fail basic tests of singleness and settlement finality, he said, without elaborating. “They are not money,” Bailey said. The passage of the Financial Services and Markets Act would bring stablecoin into line, however.

Digital money, as it already exists, “entirely held in IT systems,” could be enhanced to become “a unit of money to which there is the capability to attach a lot more executable actions, for instance contingent actions in so-called smart contracts,” Bailey said.

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A central bank digital currency (CBDC) would also be a form of enhance digital money, Bailey said. “There is no reason that I can think of which makes well designed enhanced digital money the sole preserve of central banks,” he added, but a CBDC would present distinct advantages:

“Our main motivation for a retail CBDC would be to promote the singleness of money by ensuring that the public always has the option of going into fully functional central bank money that can be used in their everyday lives.”

Bailey had a different view of wholesale CBDC. The BOE has just upgraded its Real Time Gross Settlement system. Bailey said:

“This puts us in a very strong position to deliver solutions which can integrate central bank digital money in RTGS with tokenised transactions. We think this is the fastest and most efficient route to take.”

That is without creating a wholesale CBDC, it seems. Bailey added that “cash is here to stay.”

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