The Bank of England believes that regulators may be required to impose a limit on the payment usage of stablecoins.
According to reports, the United Kingdom’s central bank is inclined towards limiting the use of stablecoins for payments. The Bank of England’s most recent posture on stablecoins reflects the efforts of UK policymakers to establish a balance between innovation in the payments space and the associated risks.
The Deputy Governor of the Bank of England (BOE), Sir Jon Cunliffe, recently delivered a speech at the Innovate Finance Global Summit in London. During his speech, Deputy Governor Cunliffe mentioned that rapid innovation in payment systems could create new risks for customers and the traditional finance industry. According to him, the country’s regulators must determine whether stablecoins for payments will be subject to restrictions.
While competition and innovation in payments are desirable from a public policy standpoint, we must protect against rapid, disruptive change that does not give the financial system time to adapt and could therefore endanger financial stability.
The official from the Bank of England was mindful of the role stablecoins play in facilitating trading and other transactions on cryptocurrency platforms. He acknowledged the superiority of stablecoins for payments in terms of efficiency and usability. However, he is concerned that, unlike conventional financial instruments, these crypto-assets do not fall into any regulatory framework. The deputy governor also emphasized the importance of stablecoins being supported by “high quality and liquid assets” for the protection of investors.
Parliament is presently debating the Financial Services and Markets Bill, which will enable banks in the United Kingdom to regulate stablecoin operators. Later this year, the Bank of England and the Financial Conduct Authority (FCA) will convene to discuss new rules for stablecoins.
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