Bank of England governor Andrew Bailey has hit out at the use of cryptocurrency such as Bitcoin for payments but has suggested stablecoins could offer ‘useful benefits’.
Bailey (pictured), previously chief executive of the Financial Conduct Authority, said crypto-assets such as Bitcoin have no connection to money and are a highly risky investment opportunity but was more positive about stablecoins which are typically linked to the value of an underlying asset.
“(Bitcoin) may have extrinsic value – you may like to collect them for instance, and as such they are a highly risky investment opportunity,” he said in a speech to the Brookings Institution.
“Their value can fluctuate quite wildly, unsurprisingly.
“They strike me as unsuited to the world of payments, where certainty of value matters.”
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However, Bailey added that where many earlier forms of cryptoassets have proved unsuitable for widespread use in payments, “stablecoins aim to do just that.”
“Some stablecoin proposals may be used to facilitate investments,” he said.
“However, where a stablecoin is used to facilitate the transfer of ‘money’ for buying goods and services and the settling of debts, then it may become widely used a means of payment and store of value.
“They change not only how you pay but what you pay with – rather than a transfer of money between bank accounts, stablecoin systems transfer the asset itself – the stablecoin – from one person to another. Stablecoins could offer some useful benefits.”
Bailey also warned that 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.