As the adoption of Stablecoins slowly takes over, management and correct regulation become a priority to maintain economic harmony. The governor of the Bank of England (Boe) Andrew Bailey seems to think in the same way.
Bailey warned that the adoption of digital currencies, including Stablecoin, could disturb the economic Applecart if correct regulation is not implemented.
For observations held during his speech to the lesson of Andrew Crockett Memorial on 3 July 2025, the nature of the reserve currency has evolved. The monetary world has gone from the previous definition of reserve currency as a fixed monetary anchor to a growing dependence on safe liquid activities such as the treasures of the United States and the liquidity offer of the central bank as and when necessary.
“First of all, at least for the big economies, could it be asked today, what is the point of the official reserves?” he said.
The governor of the bank of England Andrew Bailey says that Stablecoins could cut the trust of people in cash if they become too popular. “They could be necessary to support the liquidity of the financial system in extreme stress situations,” he said.
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In addition, Bailey also presented the notion of the changing role of the reserve currency, explaining how it moved from the convertibility of the currency to support financial stability while the capital circulates inside and outside a country.
Bailey warned: “Central banks must carefully examine the payment innovation based on Stablecoins”.
Bailey, who will soon guide the Financial Stability Board, has previously marked potential threats regarding Stablecoin and plans to face them soon.
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Stablecoin adoption could cause digital dollarization
In the wake of the reference legislation approved by the United States Senate that normalizes the use of Stablecoin, Bailey’s warnings come among the growing concerns relating to the wide adoption of Stablecoin supported in US dollars, which could cause digital dollarization.
A surprising contrast with this is the secretary of the United States Treasury Scott Bessant, who greets the Stablecoin legislation as a step towards cementation of the Dollar reserve currency status all over the world, among the concerns relating to the erosion of trust in the State of Riserva di Greenback.
“We have to carefully look at the evolution of the payment forms and if the innovation here introduces fragility into what I would call the monetary system,” said Bailey.
During his lesson he continued to underline the need for the authorities to carefully monitor any changes made to the structure of money, such as the introduction of Stablecoin issued privately, which help to mitigate any harmful effects on monetary trust.
“If, for example, Stablecoins emerge as a new form of money, we must decide how to guarantee the singularity of money and therefore trust in money in this world and what role should the notion of reserve currency should play,” he said.
He added: “The rise of Stablecoins could raise questions about the purpose of official foreign reserves in the main economies advanced today”.
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“Central banks could face heat if Stablecoins become a form of payment widely used without adequate regulations”
Bailey said that authorities should make efforts to clarify the role of reserve currencies since progress in payment technologies could avoid traditional supervision.
Some analysts believe that the adoption of Stablecoin without global coordination can divide the financial system. Without regulations in progress, the tokens issued privately could circulate outside the central control, making it more difficult to manage economies and maintain stable cross -border loans.
The authorities are currently examining the way in which Stablecoins can remain reliable and legally compliant as questions arise on the inclusion of Stablecoins in the financial monetary system or their existence outside of it.
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The role of a reserve currency has changed from the convertibility of the currency to support the conservation of financial stability
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The authorities should carefully monitor any changes made to the structure of money to mitigate any harmful effects on monetary trust
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Some regulators think that Stablecoins can potentially divide the financial system
The governor of the post Boe Andrew Bailey warns the adoption of Stablecoins threatens the central bank appeared for the first time on 99 bitcoins.