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Speaking during a World Economic Forum panel on “Resetting Digital Currencies,” Bank of England Governor Andrew Bailey said that no existing digital currency has the design and governance to make a lasting impact on global finance.
When asked whether digital currencies had turned a corner in recent years, in terms of sentiment or utility, Bailey responded, “No, I don’t think we’re there yet. I don’t think cryptocurrencies as originally formulated are it.” Instead, he said, there’s “the whole question of people having assurance that their payments are going to be made in something with stable value, which as the history lesson says ultimately links back to what we call fiat currency.”
Live now: Resetting Digital Currencies (Option 1): https://t.co/NuWna0U7hg #DavosAgenda @sheila_warren @WesternUnionCEO @WesternUnion @bankofengland
— World Economic Forum (@wef) January 25, 2021
Bailey, however, said there’s room for innovation here, which is why it’s important to continue discussing stablecoins, which are digital currencies designed to hold their value to another currency, and central bank digital currencies, which would be government-issued assets.
Andrew Bailey has led Britain’s central bank since March of last year, after previously serving as Deputy Governor and then as Chief Executive of the UK’s securities regulator, the Financial Conduct Authority. Bailey’s primary concern, then, is with regulation, which he said was “about serving the public interest.”
Bailey highlighted three areas for digital currency in which there were regulatory issues that must be reconciled regarding the public interest: ensuring stability of value (which is important not just for payments but also interoperability), being able to tackle financial crime, and maintaining the privacy of personal information.
Bailey's comments dovetail with those of Lloyd Blankfein, the former CEO of Goldman Sachs, who said of Bitcoin on CNBC's Squawk Box today, "If I were a regulator, I would be kind of hyperventilating at the success of it at the moment, and I’d be arming myself to deal with it.”
Like Bailey, Blankfein is skeptical of Bitcoin's potential as a payment method, given its volatility, as well as its use as a store of value.
“It’s a store of value that can move 10% in a day—that, if you lose a code, or lose a slip of paper, it’s lost forever,” Blankfein said.
Similarly, until some core issues regarding digital assets are reconciled, Bailey's not hopping on the cryptocurrency bandwagon—no matter how far up market caps edge.
“Don’t think the technology comes before the public interest,” he said. “It doesn’t.”