Bank of England (BoE) Deputy Governor for Financial Stability has shared her vision for a “multi-money” system that includes stablecoins and other traditional assets in the UK ahead of the upcoming consultation on its crypto policy proposals.
In a conference in London, Breeden detailed her vision for a system where multiple forms of money, including traditional and tokenized commercial bank deposits, stablecoins, and central bank money, are freely interchangeable, “with technology driving faster, cheaper, and more innovative payments for the benefit of business, households, and users of financial markets; and – critically – with the whole system underpinned by trust in money itself.”
She emphasized the need for a robust regulatory framework that enables innovation to thrive, as appropriate risk management will support broader adoption and the sector’s development. However, Breeden noted that designing those regulatory regimes in a fast-moving world isn’t an easy task, forcing officials to be open to “learning as we go.”
“US dollar stable coins will have an influence all around the world,” she affirmed, adding that it is “absolutely essential that we produce a regime that supports the issuance of sterling stablecoins.”
She noted that “stablecoins, for a long time the preserve of crypto markets, are beginning to go ‘mainstream’. Given they are an existing form of ‘digitally native’ money, their safe adoption could unlock faster, cheaper settlement for cross-border transactions as well as supporting trading of tokenised securities.”
During her speech, Breeden highlighted that the UK “set out the necessary legislation for a regulatory regime for stablecoins in 2023,” while the BoE and the Financial Conduct Authority (FCA) have been engaging with the industry to develop more detailed rules of that regime.
The HM Treasury has also published a draft of proposed provisions to establish a complete regime for cryptocurrencies, which are expected to set clear transparency, consumer protection, and operational resilience standards.
Nonetheless, the UK’s former Chancellor of the Exchequer, George Osborne, has criticized the government’s approach, affirming that they must “catch up” or risk being “left behind” during the second crypto wave.
Nonetheless, BoE’s deputy governor affirmed that the central bank has been listening to feedback on its proposals for a regulatory regime for systemic stablecoins, like allowing the digital assets to hold a portion of their backing assets in a subset of high-quality liquid assets (HQLA), such as short-dated government securities.
This change aims to address feedback that the initial approach “would not support the predominant business model amongst stablecoin issuers, which relies on income from backing assets.”
Breeden added that the BoE will set out some of the reviewed proposals for consultation later this year before finishing its regime.
