Bank of England Governor: The combination of stablecoins and CBDC will be the future of the payment sector.

The Governor of the Bank of England, Andrew Bailey, delivered a one-hour long speech online on Monday, covering topics such as stablecoins, central bank digital currencies (CBDCs), and the future of digital payments.

Bitcoin Bad, Stablecoins Good

In a speech, Andrew Bailey pointed out that digital assets like Bitcoin lack practicality in terms of payments due to the lack of price certainty, making them unsuitable for widespread adoption in the payment space. However, Bailey believes that stablecoins, backed by fiat currency, can offer some useful benefits in this regard. He described a possible future where stablecoins and CBDCs will coexist and complement each other from a user experience perspective.

"Stablecoins and CBDCs are not necessarily mutually exclusive. With proper design, they can coexist, serving as different payment mechanisms and integrating into stablecoin ecosystems such as wallets, providing consumers with access to CBDCs. Private and public sectors may work together towards this in future payments."

However, Bailey added that stablecoins and CBDCs are not the only solutions to "meet evolving needs" and "reduce payment frictions." Relevant parties need to continue improving existing infrastructure, such as updating and unifying the Real Time Gross System (RTGS), and the UK's recently developed New Payments Architecture, a retail payment infrastructure solution with unified and open characteristics.

Regulation of Stablecoins

Regarding the issue of regulating stablecoins, Andrew Bailey agrees with other regulatory bodies, stating that international coordination is indeed necessary for stablecoins.

"Global stablecoins are a cross-border phenomenon. They can be issued in one region, denominated in another currency, and used by consumers in a third party. Regulatory responses must match this, just like banks and traditional payment systems, with regulatory responses based on internationally recognized standards. Global issues must be addressed globally, especially for stablecoins used for cross-border transactions in multiple currencies."

Bailey emphasized that the G7 and the Financial Stability Board (FSB) are working on regulatory issues in this area, with specific discussions expected to be made public in October this year.