BOE governor rejects crypto, stable coins in favor of ‘advanced digital currency’

Andrew Bailey, Governor of the Bank of England (BoE), delivered A speech on July 10 in which he smoothly moved from central bank 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 “advanced digital money”.

The issues of singularity of funds and finality of settlement came to the fore earlier this year following bank failures in the United States and Switzerland, Bailey said. Without elaborating, he said that both cryptocurrencies and stablecoins fail the basic tests of singletonality and settlement finality. “They’re not money,” Bailey said. However, the passage of the Financial Services and Markets Act will bring stablecoins into line.

Bank of England Governor Andrew Bailey says inflation is likely to fall “clearly” this year and the full impact of the rate hike has not yet hit the economy. https://t.co/kntdoEKYPr

— Bloomberg Economics (@Economics) 10 July 2023

The digital currency, as it already exists, “housed entirely in IT systems”, could be scaled to become “a unit of nasi” with the ability to engage a much greater number of executable activities. , for example, contingent activities in so-called smart contracts,” Bailey said.

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

“Our main motivation for the retail CBDC will be to promote the singularity of money by ensuring that the public always has the option of having access to fully functional central bank money that they can use in their everyday lives.”

Bailey had a different take on wholesale CBDCs. BOE has recently upgraded its Real-Time Gross Settlement (RTGS) system. Bailey said:

“This puts us in a very strong position to deliver a solution that can integrate central bank digital money into RTGS with tokenized transactions. We believe this is the fastest and most efficient route.”

It appears that this is without creating a wholesale CBDC. Bailey said that “cash is here to stay.”

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