The crypto industry faces heightened scrutiny in the United Kingdom as the Bank of England (BoE) intensifies its call for stricter regulation. In a recent speech, BoE Governor Andrew Bailey voiced concerns over the risks posed by cryptocurrencies like Bitcoin and stablecoins, even as the central bank actively explores issuing its own digital currency, the “digital pound.”
Divergent Approaches to Bitcoin and Stablecoins
Speaking at The University of Chicago Booth School in London on February 11, 2025, Governor Bailey acknowledged that Bitcoin and stablecoins require different regulatory approaches. He described the broader cryptocurrency sector as a “pure investment risk” due to its inherent volatility, although he admitted his perspective on crypto has evolved over time.
Regarding stablecoins, the central banker recognized their potential to fulfill certain monetary functions, particularly in payments. However, he emphasized that stablecoins also exhibit characteristics of mutual funds, rendering them “quite opaque.”
“We must have sensible regulatory standards, especially for stablecoins, because if they are to perform functions in the payments world, we will be very interested in that. We must set a high bar [for these regulations] because people’s expectations using these payment methods must be appropriate, as with money.”
– Andrew Bailey, Governor of the Bank of England
Paving the Way for the Digital Pound
Governor Bailey further confirmed that the Bank of England continues to explore the possibility of issuing its own central bank digital currency (CBDC), the digital pound. He likened this potential development to Apple’s introduction of the iPhone, emphasizing the importance of not solely focusing on negative aspects but also recognizing the tangible benefits of new technologies.
“The question is how to obtain the benefits of digital technology in the world of payments. Should we create a new form of central bank currency, or will this be done in a commercial banking payment system, or do we need both?”
– Andrew Bailey, Governor of the Bank of England
The Bank of England plans to launch a “Digital Pound Lab” later this year to further its research on a potential CBDC. This aligns the United Kingdom with the European Union, where the European Central Bank (ECB) also aims to develop its digital euro as swiftly as possible, potentially by 2025.
Balancing Innovation and Regulation
The Bank of England’s push for stricter crypto regulation comes at a time when the industry is grappling with increased oversight worldwide. While regulators aim to mitigate risks and protect consumers, there are concerns that excessive regulation could stifle innovation and hinder the growth of the crypto ecosystem.
- Regulatory clarity is crucial for fostering a stable and secure crypto market
- Balanced approach is needed to encourage responsible innovation while safeguarding users
As central banks like the BoE explore CBDCs, it remains to be seen how these digital currencies will coexist with established cryptocurrencies and stablecoins. The regulatory landscape will play a pivotal role in shaping the future of money and determining the extent to which decentralized and centralized digital assets can thrive side by side.
Key Takeaways
- Bank of England calls for strict regulation of Bitcoin and stablecoins
- Governor Andrew Bailey acknowledges potential of stablecoins in payments
- BoE actively explores issuing its own CBDC, the digital pound
- Balancing innovation and regulation is key for the crypto industry’s future
As the Bank of England intensifies its call for crypto regulation and advances its CBDC plans, the industry braces for a new era of oversight and adaptation. The path forward will require collaboration between regulators, innovators, and users to ensure that the transformative potential of cryptocurrencies and digital currencies is harnessed responsibly and inclusively.
