Bank of England Governor Warns Stablecoins Threaten Financial Stability

Speaking recently, Bailey argued that without robust regulation, stablecoins could fundamentally undermine the nature of money and disrupt the traditional banking system’s architecture.

He explained that, unlike conventional bank deposits, stablecoins do not offer the same level of protection or guarantees for users. This, he cautioned, could result in a shift of funds away from the regulated financial sector, ultimately weakening credit creation and impairing central banks’ ability to manage monetary policy effectively.

IMG TXT: BoE Governor warns against issuing own Stablecoins. Source: The Times .

Bailey’s concerns have intensified amid reports that several major investment banks are exploring plans to launch their stablecoins. During a recent public appearance, he described these developments as “particularly concerning,” underscoring the need for careful scrutiny.

“Stablecoins are proposed to have the characteristics of money. That money is a medium of exchange. Therefore, they really do have to have the characteristics of money, and they have to maintain their nominal value,”

Bailey said.

“We are going to have to look at it very closely through that lens. It’s both a financial stability issue and a money issue in that sense.”

In his dual role as Chair of the Financial Stability Board, Bailey further emphasized that stablecoins could weaken sovereign control over national currencies and foster unregulated connections between cryptocurrency markets and traditional finance.

As an alternative, he advocated for tokenized deposits, digital versions of traditional money issued by regulated institutions. According to Bailey, this model preserves the structure of the banking system while delivering the benefits of digital payments, describing it as a more “sensible” path forward.

Meanwhile, the stablecoin market has seen rapid growth, now valued at approximately $255 billion, according to the Bank for International Settlements. Between January 2023 and February 2025 alone, stablecoin transactions settled more than $92.4 billion globally, underscoring the increasing adoption of these digital assets .