Banks power is on with new development that has emerged in the world of stablecoins. The Bank of England is considering imposing restrictions on these controversial payment methods while also developing brand-new regulations for the sector. According to the deputy governor, Jon Cunliffe, the BoE and the Financial Conduct Authority have big plans for their consultation on stablecoin regulations later this year.
It’s vital to remember that the BoE said in May 2022 that it intended to regulate stablecoins, potentially having an impact on financial stability due to its banks’ power. The Financial Services and Markets Bill, which would allow stablecoins to be incorporated into existing payment laws and set cryptocurrency regulations, is now making its way through Parliament.
Cunliffe recently emphasized the delicate balancing act between competition and innovation in the payments industry while also providing protection against unexpected, possibly unstable developments. Future rules will handle stablecoins similarly to commercial bank currency in light of this but without the same fail-safes.
Stablecoins will be convertible into fiat money at par value, but they won’t be as protected as bank deposits that the Financial Services Compensation Scheme covers. Deposits made by bank customers are guaranteed up to £85,000 ($105,059).
He also discussed his thoughts on regulating stablecoins. This initiative will be based on the principles established in 2019 by the Bank for International Settlements Committee on payments and market infrastructure and the International Organization of Securities Commissions. Cunliffe also emphasized the potential for new ledger technologies to change the banking system. He thinks that central bank-issued digital currencies, tokenized bank deposits, and smart contracts would drastically disrupt the market by giving genuine banks power. He also stressed the significance of a complete tokenized bank deposit strategy in combination with the stablecoin regulatory framework.
Cunliffe thinks that by taking this approach, banks and non-banking entities could fully comprehend the possibilities and needs of their different regulatory regimes when designing payment solutions based on novel technology.
While the Bank of England investigates the notion of a digital pound, it is also looking at ways to ensure that tokenized transactions are paid in central bank money. Cunliffe indicated that one possible approach would be to develop a new ledger system.