The Bank of England believes that regulators may have to enforce a limit on the usage of stablecoins for payments.
The central bank’s deputy governor has highlighted the potential risks of rapid innovation in this sector.
The Bank of England and the Financial Conduct Authority are set to meet later this year to explore new rules for stablecoins.
The United Kingdom’s central bank is reportedly leaning towards limitations for the usage of stablecoins for payments. The Bank of England’s latest stance on stablecoins comes as policy makers in the UK are trying to strike a balance between innovation in the payments space and the potential risks that are associated with crypto.
Disruptive change from stablecoins could threaten financial stability
Sir Jon Cunliffe, the Deputy Governor of the Bank of England (BOE), recently gave a speech at the Innovate Finance Global Summit in London. During his speech, Deputy Governor Cunliffe pointed out that rapid innovation in payment systems may pave the way for new risks for customers and the traditional finance sector. According to him, the country’s regulators need to decide if there are limits to be imposed on stablecoins for payments.
While, from a public policy perspective, we want competition and innovation in payments we need to guard against rapid, disruptive change that does not allow the financial system time to adjust and could therefore threaten financial stability”
Jon Cunliffe, Deputy Governor of the Bank of England
The Bank of England official was aware of the role that stablecoins play in facilitating trading and other transactions on crypto platforms. He acknowledged the superiority of stablecoins in terms of efficiency and functionality for payments. However, he is concerned about the fact that these crypto assets do not fit into any regulatory regime, unlike traditional finance instruments. The deputy governor also emphasized the need for stablecoins to be backed by “high quality and liquid assets” in the interest of investor protection.
The UK’s parliament is currently discussing the Financial Services and Markets Bill, which will allow banks in the country to regulate operators of systemic stablecoins. The Bank of England and the Financial Conduct Authority (FCA) are set to meet later this year to discuss new rules for stablecoins.