Yesterday the Bank of England Governor, Andrew Bailey, attended a Treasury Select Committee hearing on financial stability. During the session, there was a discussion about stablecoins and a digital pound, both a retail and wholesale central bank digital currency (CBDC). Bailey doesn’t see the need for either. His comments are summarized first, and the full transcript is below.
On the topic of stablecoins, he said he couldn’t envisage a sufficiently well-backed stablecoin that is not a synthetic CBDC (which has the backing assets deposited in an account at a central bank).
Bailey didn’t specifically mention Fnality, backed by 17 financial institutions, that will operate an omnibus account at the Bank of England, effectively a joint account based on funds from these 17 institutions. The central bank account will provide the reserves for its settlement token, which technically is a synthetic CBDC. It has yet to launch but has already been recognized by the UK Treasury as a systemically important payment system. Fnality is also planning central bank reserves for a wholesale digital euro, dollar and yen.
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