Bank of England Governor Highlights Limitations of Crypto Assets, Emphasizes Potential of Enhanced Digital Money.
In a recent speech, Andrew Bailey, the governor of the Bank of England, expressed his views on crypto assets, specifically Bitcoin (BTC) and stablecoins, outlining their limitations within the existing financial system.
Bailey addressed two forms of crypto assets currently in circulation: unbacked cryptocurrencies like Bitcoin and stablecoins such as Tether and US Dollar Coin. He pointed out that unbacked crypto lacks intrinsic value and is highly volatile, making it more suitable for speculative investments rather than serving as a reliable medium of exchange.
Regarding stablecoins, which are used as settlement assets in crypto transactions, Bailey raised concerns about their robustness and failure to meet the standards required for safe money within the financial system. He highlighted their inability to pass the basic tests of singleness and settlement finality, ultimately concluding that neither unbacked crypto nor stablecoins can be classified as money.
However, Bailey also acknowledged the existence of enhanced forms of digital money that meet the fundamental criteria of singleness and settlement finality. He discussed their potential to incorporate more executable actions, including contingent actions through smart contracts, which can range from simple to complex scenarios.
When contemplating the future of enhanced digital money, Bailey admitted that certainty is elusive when it comes to new innovations. Nevertheless, he expressed his belief that digital money holds promise and cautioned against a lack of imagination in foreseeing its potential. He stressed that the absence of a specific detailed use case at present should not be misconstrued as an indication that one will never emerge.
In conclusion, the governor of the Bank of England shed light on the limitations of existing crypto assets while highlighting the possibility of enhanced digital money that could address the shortcomings and introduce innovative features to the financial landscape.
