The Governor of the Bank of England warned that the digital pound must not undermine the role of commercial banks and recognized the currency function of stablecoins

Odaily Planet Daily News Bank of England Governor Bailey expressed doubts about the role of central bank digital currency (CBDC) in financial stability, emphasizing that the central bank must maintain control over money transmission through the banking system. In a speech at the Booth School of Business at the University of Chicago in London, Bailey stressed that while financial markets are evolving, the basic principles of money issuance and liquidity must remain unchanged. He pointed out that non-bank financial institutions (NBFIs) play an increasingly important role in global finance, prompting the central bank to adjust its risk management framework. However, he made it clear that this shift does not mean expanding the use of central bank funds beyond traditional banks. He added: "There is no reason to provide permanent facilities for non-bank institutions because they do not create money." In addition, Bailey said that the launch of the digital pound will not change the core policy of the Bank of England to achieve monetary stability, and any digital currency issued by the central bank must retain the existing financial framework. Bailey confirmed that the central bank is still working with the British government to study the feasibility of the digital pound. However, he stressed that while digital technology offers new possibilities for payments, the decision to introduce CBDC must be based on clear economic benefits, not speculative trends. While he acknowledged that a digital pound could serve as an additional payment option, he warned against undermining the fundamental role of commercial banks as intermediaries. Bailey also noted that the concept of central bank liquidity must be bank-centric. CBDCs are not intended to replace private sector financial institutions, but rather complement that system. Its position suggests that while the Bank of England is open to the development of digital currencies, it will not rush to launch a CBDC or expand the adoption of stablecoins without comprehensive regulatory safeguards. Bailey also discussed Bitcoin and stablecoins in his speech. He described Bitcoin as a purely speculative asset, while acknowledging that stablecoins can perform some monetary functions. However, he warned that if stablecoins are to operate in the payment ecosystem, they must meet a “high standard” of regulation. (CryptoSlate)