BoE Chief: Stablecoins Could Redefine UK Banking Model

- Andrew Bailey advocates separating money creation and credit to enable stablecoin growth. - Bank of England eyes systemic stablecoin regime with potential central bank account access. On October 1, 2025, Cointelegraph reported that Bank of England Governor Andrew Bailey proposed that stablecoins could flourish if the financial system separated money creation from credit extension. These comments highlight a significant shift in the central bank's stance on digital currencies and could impact the UK's evolving financial landscape. In an article for the Financial Times, Bailey outlined his perspective on the intertwined nature of money and credit under the current fractional reserve banking model. He suggested a restructuring that would allow stablecoins and traditional banks to coexist, which would also enable non-bank entities to take on greater responsibility for providing credit. However, Bailey emphasized the importance of thoroughly assessing the consequences of such systemic changes. These comments emerge amidst friction between the UK cryptocurrency industry and the Bank of England, after the Bank had floated the idea of imposing individual caps on stablecoin holdings. Industry representatives criticized this proposal as costly and challenging to implement, arguing that such regulatory measures could diminish the UK's competitiveness in digital assets. Looking ahead, Bailey announced the Bank of England will release a consultation paper in the coming months to outline a systemic stablecoin regime. A critical proposal under consideration would grant widely used stablecoins access to central bank accounts, which could solidify their status as money within the financial system and foster innovation in payment systems. Bailey stressed that stablecoins must meet strict criteria, such as having backing from risk-free assets and protection against operational vulnerabilities like hacking. Regulatory scrutiny remains paramount to ensure financial stability. According to CoinMarketCap data from October 1 at 15:08 UTC, Tether USDt (USDT) was trading at $1.001, with a 4.1% increase in its 24-hour trading volume. Similarly, USD Coin (USDC) was trading at $1, with a 1.2% change in 24-hour volume. Meanwhile, Dai (DAI) was valued at $1, reflecting a 1.7% increase in 24-hour volume.