Bank of England governor Andrew Bailey on Thursday criticized Bitcoin and said that it is not relevant to money in his long speech addressing various aspects.
“I will start with crypto-assets, such as bitcoin, which have appeared in the last ten years or so. They have no
connection at all to money. They may have extrinsic value – you may like to collect them for instance, and
as such they are a highly risky investment opportunity. Their value can fluctuate quite wildly, unsurprisingly.
They strike me as unsuited to the world of payments, where certainty of value matters,” he said.
“The next innovation is alternative payments such as e-money, which in Europe has grown under the
auspices of the Second Electronic Money Directive (EMD2) and the Second Payment Services Directive
(PSD2).
“To be clear, this has been translated into the UK as part of the on-shoring of EU law in the context
of Brexit. This regime creates something which is more money-like in the sense of commercial bank money,
but doesn’t have the same direct link to fiat money, and the safeguarding regime does not have all the
features of deposit protection. It is therefore a hybrid. We must ensure that users fully understand the
difference in protection, and I suspect at the moment that is not widely the case. The standards are less
developed than those for banks, there is no depositor protection scheme, and firms are subject to only
limited capital and liquidity requirements. Finally, there is no resolution or administration regime. This
means that if firm failed, holders of its ‘money’ would be forced to pursue any recovery through a corporate
insolvency procedure, which would neither be quick nor guarantee their funds back,” he added.
The third innovation, and the one on which I will focus more, is so-called stablecoins.
Where many earlier forms of crypto-assets, such as bitcoin, have proved unsuitable for widespread use in
payments, stablecoins, and particularly global stablecoins, aim to do just that. Not all stablecoins are intended for use in making payments. Some stablecoin proposals may be used to facilitate investments.
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, he added in his speech.
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