The governor of the Bank of England (BoE) has said stablecoins need global regulation, warning private issuers that an international regulatory framework could soon be in the cards.
Governor Andrew Bailey said regulators have to come together for a “global response” so they can effectively regulate stablecoins.
Speaking Thursday, he said the international nature of stablecoins, which can be based in one country and operate in another, meant failure to coordinate could result in confusion and regulatory fragmentation.
Bailey addressed an audience at the Hutchins Center on Fiscal & Monetary Policy of the Brookings Institution – a think tank that has called on policymakers to devise regulation for cryptocurrencies.
In a published speech, he said: “[H]ost regulators of global stablecoins must, and are, working with other regulators in other jurisdictions to ensure that they are appropriately regulated and gaps in coverage, opportunities for regulatory arbitrage, do not emerge.”
While Bailey recognized stablecoins could reduce frictional costs, he emphasized that private issuers had to do more to ensure users can always redeem their stablecoins 1:1 with the underlying fiat currency.
He also warned that future stablecoin offerings may have to do more to satisfy regulatory standards at both a national and international level.
Compared to bitcoin, which he described as wholly unsuitable for payments, he said some stablecoin proposals could become the primary means for purchasing goods and services.
In a possible inference to Facebook’s libra coin, he said discussions about multi-asset stablecoins were currently premature.
The BoE has previously toyed with the idea of launching a digital pound – even suggesting private companies could play a role in issuance.
It also joined a working group with five other central banks and the Bank of International Settlements (BIS) at the start of the year.