By David Milliken
LONDON, May 8 (Reuters) – Bank of England Governor Andrew Bailey said on Friday he expected there to be a “wrestle” between the United States and international regulators on the treatment of stablecoins, a form of cryptocurrency he sees as a potential threat to financial stability.
Stablecoins are typically pegged at a fixed rate to the U.S. dollar or another major currency, and aim to be an alternative to the existing banking system for making domestic or international payments.
The current United States administration under President Donald Trump has been keen to promote stablecoins, which often use U.S. Treasury bills as a backing asset.
But Bailey, who chairs the Financial Stability Board, an international body that aims to coordinate regulation, has long been sceptical about cryptocurrencies and wary of the potential risks from stablecoins.
“If we want stablecoins to be part of the architecture of payments globally … they’re only going to work if we have international standards. Frankly, that, I think, is going to be a coming wrestle with the (U.S.) administration,” Bailey said at a conference on financial imbalances hosted by the BoE.
Bailey said he was concerned some U.S. stablecoins could not be readily turned into dollars without going through a crypto exchange, potentially limiting their convertibility in a crisis.
But if stablecoins became widely used for cross-border payments, then during a crisis hard-to-convert U.S. stablecoins could flow to jurisdictions such as Britain which intend to have robust obligations for convertibility, he said.
“We know what would happen if there was a run on a stablecoin – they’d all turn up here,” Bailey said.
(Reporting by David Milliken; editing by William James)
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