DUBROVNIK, Croatia – A Bank of England official predicts the current enthusiasm for stablecoins may be short-lived, with digital bank deposits eventually taking their place in the financial landscape.
Speaking at a financial conference in Dubrovnik, Croatia on Sunday, Bank of England policymaker Megan Greene suggested that tokenized deposits – electronic versions of conventional bank accounts – will likely overtake stablecoins in the coming years.
“I think tokenised deposits are probably going to take over from stablecoins and five years from now, I suspect we might wonder why we were talking about stablecoins,” Greene said during the conference.
Stablecoins are cryptocurrency assets created to hold steady values and have gained traction recently, though their growth has plateaued in recent months while some experts still anticipate future increases.
Greene acknowledged there’s room in the market for central bank digital currencies, stablecoins, and digital deposits, but believes the latter will ultimately prevail once traditional banks realize they risk losing conventional deposits otherwise.
However, U.S. Federal Reserve policymaker Christopher Waller, who appeared on the same discussion panel, offered a contrasting perspective. He championed stablecoins as beneficial financial innovation that could lower costs and shouldn’t face overly restrictive regulations.
“I’ve always just looked at stablecoins as a payment instrument; there’s nothing evil about it, nothing dangerous about it,” Waller stated. “They are just bringing competition into the payments world.”
Greene explained that digital deposits “haven’t taken off because commercial banks don’t want to lose the fees … But they’re going to lose them anyhow and when they realize this, they will put more (effort) into developing these.”
She raised concerns about stablecoins’ actual stability, regulatory uncertainties, and their use in illegal activities. Additionally, she noted that stablecoins draw deposits from traditional banks, potentially weakening monetary policy effectiveness.
Waller countered that stablecoins serve cross-border payment needs and pose enough of a competitive threat that banks are actively lobbying against them.
“These things are used for cross-border payments, and they are scaring the banks,” Waller said. “If you think banks don’t think this is a threat, then why are they lobbying so hard to stop it?”
Despite the debate, Greene maintained her position that stablecoins face significant challenges that may limit their future prospects.
“I like to think of it as a massive race between the tortoise, the hare and the rhino,” she explained.
“The tortoise is the central bank digital currency …the hare is stablecoins and the rhino is tokenised deposits. We’ll probably end up with all three, but if I had to put money in one … it would be the rhino, tokenised deposits, which I think will probably take off.”
