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. BoE Eyes ‘Multi-Money’ System With Stablecoins On Wednesday, Bank of England Deputy Governor Sarah Breeden affirmed that the central bank must keep up with the global developments as innovative technology paves new ways of making pavements. 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.” To achieve this, the deputy governor outlined that the BoE must provide the necessary underlying infrastructure, deliver proper regulatory frameworks, and establish an overall strategy to facilitate innovation and economic growth while protecting financial stability. 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.” According to Bloomberg, the deputy governor also stated that UK officials have “an eye” on US regulation following the enactment of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act in July. “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.” Crypto Regime Consultation In Q4 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. Notably, the FCA has been working to establish a more comprehensive regulatory framework for digital assets starting next year, releasing a Discussion Paper on the features of the upcoming crypto regime as part of its crypto roadmap. 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. As reported by Bitcoinist, Osborne slammed Chancellor Rachel Reeves and Bank of England governor Andrew Bailey’s crypto strategy, noting that, some of the proposed rules, including requiring sterling stablecoins to be backed only by central bank reserves, guarantee that the UK doesn’t lead the sector, as major financial players will continue to innovate “regardless of the Bank of England’s stance.” 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.
