The Bank of England (BoE) is reportedly considering whether to limit stablecoin payments in new regulations, according to the Bank of England’s deputy governor, Jon Cunliffe.
Speaking at the annual Innovate Finance Global Summit, Cunliffe said the Bank of England and the Financial Conduct Authority (FCA) plan to hold consultations on new regulations for stablecoins later this year.
Cunliffe emphasized that “while we want to see competition and innovation in payments from a public policy perspective, we need to guard against rapid and disruptive changes that do not allow the financial system time to adjust and could threaten financial stability.” .”
The new regulations aim to regulate stablecoins in a similar way to regulating commercial bank currencies, including requiring stablecoins to be backed by fiat currency, have a face value and be redeemable on demand. However, unlike commercial bank deposits, stablecoins do not receive bankruptcy protection.
The rules for the stablecoin will follow principles laid out last year by the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). The guidance includes principles such as security, efficiency and resilience of payment systems, as well as transparency and accountability of payment system operators.
Stablecoins are digital tokens designed to maintain a stable value by pegging their value to fiat currencies or other assets. They are commonly used for transactions on blockchain-based platforms and are popular for their stability and security.
However, the use of stablecoins for payments has drawn attention from regulators due to their potential impact on financial stability and consumer protection.
The UK central bank’s move to regulate stablecoins follows a global trend of increased regulatory scrutiny of digital currencies. In the United States, the Securities and Exchange Commission (SEC) has been scrutinizing stablecoin issuers and has filed a lawsuit against cryptocurrency firm Ripple Labs.