Stablecoins and pegged currencies will become of even greater importance moving forward. It is only normal to see this concept draw attention from regulators. Bank of England, for example, wants to regulate e-money as quickly as possible.
Bank of England and Stablecoins
There is a lot of excitement surrounding pegged digital currencies. Tokens deriving value from fiat currencies can change the way online payments and commerce occur. It is, at this point, seemingly a matter of time until central banks start to get involved in the matter. Bank of England is already throwing its hat in the ring, especially where demand for regulation is concerned.
BoE Governor Andrew Bailey wants to introduce certain payment standards for stablecoin. More specifically, he prefers to use the same standards in place for other forms of money. Whether pegged currencies can be regulated in such a manner, remains to be seen. Not all of these assets are issued by a central bank or financial institution. In the cryptocurrency space, several dozen offerings exist already.
It all comes down to whether there is a legal claim for coin holders. Not all projects adhere to this standard, creating some degree of concern. Other pegged currencies try to offer material risk, albeit in a roundabout way. It is evident that such discrepancies and potential issues need to be addressed.
It also seems as if the Bank of England wants stablecoin issuers to be incorporated in the UK. More specifically, this will apply to projects looking into a digital Pound Sterling. How it would apply to foreign companies, remains unclear at this time. By the look of things, central bank digital currencies will be shown more leniency.
Addressing E-Money Shortcomings
In the same speech, Bailey also touches upon the concept of e-money. More specifically e-money currently doesn’t have any direct link to fiat currency. There is no deposit protection or any other form of “insurance”. From a regulatory point of view, this is something the Bank of England wants to see changed in the future.
All of these statements confirm the UK isn’t entirely ready to deal with e-money and stablecoins. Bank of England has been pursuing a central bank digital currency, yet those plans appear to be put on ice. No one really knows what the future will hold, but it seems something is bound to happen sooner rather than later.