BoE Governor Andrew Bailey Warns Against Bank-Issued Stablecoins

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In a July 13, 2025, interview with Bloomberg, BoE Governor Andrew Bailey raised red flags about private bank-issued stablecoins, warning that they could destabilize the UK’s financial system by draining deposits, limiting bank lending, and weakening the Bank of England’s control over monetary policy.

Bailey Pushes for Tokenized Deposits Over Stablecoins

Bailey’s concern lies in the potential for stablecoins to disrupt the delicate balance of modern banking. He explained how these privately issued stablecoins could siphon deposits away from traditional banks, creating a dual threat. First, by reducing the deposit base that forms the foundation of the banking sector’s ability to lend, stablecoins could constrain credit availability across the economy.

Second, and maybe even more crucial, bank-issued stablecoins could erode the central bank’s role to conduct effective monetary policy by dimminisihing the role of the central bank money as the ultimate settlement asset.

The Governor’s position aligns with the Bank of England’s published stance in its 2024 discussion on innovation in the financial system, where it detailed its approach to innovation in money and payments.

Rather than rejecting digital innovations outright, Bailey proposed tokenized bank deposits, which he views offer a more measured approach forward.

These digital instruments, representing existing fiat currency and held within regulated banks, are seen as safer alternatives, as they offer the same technological benefits as stablecoins while maintaining crucial safeguards.

Bailey’s warnings echoed his earlier remarks as reported in Andrew Bailey warns banks against issuing their own stablecoins, where he emphasized that the use of privately issued digital currencies could threaten monetary policy tools.

While the Bank of England has no immediate plans for a retail digital pound, Bailey confirmed that wholesale applications and tokenized commercial bank money remain active areas of interest. These models offer banks a way to innovate while maintaining the structure of the current financial system.

https://twitter.com/BIS_org/status/1937499754394444167

Global Regulators and Banks Move Toward Tokenization

Bailey’s concerns are part of a broader international shift. In June 2025, the Bank for International Settlements (BIS) warned that widespread stablecoin use could limit central banks’ control over inflation and interest rates. This warning supports the trend toward regulated digital finance backed by public institutions.

Institutional adoption of regulated digital assets continues to rise. U.S. spot Bitcoin ETFs have now crossed $50 billion in net inflows, just 18 months after their January 2024 debut, led by BlackRock’s IBIT and Fidelity’s FBTC. This signals a growing appetite for transparent, regulated crypto exposure among large investors.

Large financial firms are already testing tokenized banking solutions. JPMorgan is piloting a tokenized deposit system known as JPMD on Coinbase’s Base blockchain, aimed at enabling institutional clients to move U.S. dollars instantly using blockchain-based settlement.

This pilot demonstrates how tokenized deposits can serve real-world needs while staying within regulatory boundaries.

https://twitter.com/MarioNawfal/status/1929127555866771534

Support for tokenization is also growing within the blockchain ecosystem.

Mantra Chain recently launched a $108.8 million fund to promote digital finance infrastructure, focusing on real-world asset (RWA) tokenization and blockchain innovation. The fund aims to accelerate adoption through startup support and public-private partnerships.

Bailey’s push for tokenized deposits over new currencies offers a safer way to innovate while keeping the financial system stable.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.