On April 12, Governor Andrew Bailey of the Bank of England addressed the need for stablecoin regulation during a press conference at the Institute of International Finance in Washington. He highlighted the importance of providing a strict regulatory framework for stablecoins, akin to the one in place for traditional financial products, as these digital currencies currently lack an “assured value.”
The quest for assured value
Bailey emphasized that stablecoins should meet the same characteristics and regulations as real money to function effectively as a legitimate form of currency. However, no such assets have achieved this status yet. He also urged regulators to consider implementing appropriate liquidity buffers to address potential crises, such as the recent incident involving Silicon Valley Bank that affected numerous investors.
As the Bank of England continues to monitor the evolution of digital money, it is also considering the possibility of issuing a Central Bank Digital Currency (CBDC). While digital money has existed for decades, its management technology, such as blockchain, has transformed over time. Blockchain enables a decentralized, auditable method of transferring money more efficiently, although centralization remains the norm for legal, geopolitical, and practical reasons.
Bailey argued that while digital money should not solely exist as CBDCs, it is crucial to establish an “anchor to the value of all forms of money, including new digital ones, and to ensure the maximum opportunity for innovation in payment services.”
Regulatory hurdles and the future of stablecoins
Despite regulators discussing stablecoin regulation for years, no consensus has been reached on the necessary steps to safeguard investors. According to Kristin Smith, Executive Director of the Blockchain Association, this may be due to U.S. regulators focusing more on the illicit uses of stable digital assets, such as money laundering or terrorism financing, rather than their day-to-day use as digital money.
Smith also noted that cryptocurrencies are generally more transparent than traditional financial systems, but adequate regulation is essential to prevent stifling innovation in the sector.
In contrast, Jeremy Allaire, CEO of Circle, argued that the SEC should not regulate such assets. He stated that the SEC lacks the qualifications and mandate to regulate pegged cryptocurrencies and suggested that other custodians in the country are better suited for the task. Circle is responsible for USDC, the world’s second-largest stablecoin.
Source: https://www.cryptopolitan.com/bank-of-england-wants-stablecoin-regulations/