The Bank of England has expressed its skepticism on the current state of stablecoins. According to Jon Cunliffe, the Deputy Governor of the Bank of England, the current stablecoin offerings do not meet the standards for robustness and uniformity that are currently applied to commercial bank money and existing payment systems.
Cunliffe acknowledged that stablecoins offer the possibility of greater efficiency and functionality in payments. However, he emphasized that it is highly unlikely that any of the current stablecoin offerings would meet the standards set by the central bank.
The Bank of England is planning to work with the Financial Conduct Authority on regulation after the Financial Services and Markets Bill is passed.
Stablecoins have been gaining popularity in recent years as a digital currency that is backed by a reserve asset. This means that the value of the stablecoin is pegged to a fiat currency, commodity, or cryptocurrency.
Stablecoins are seen as a way to address the volatility that is inherent in cryptocurrencies such as Bitcoin. They are also being used to facilitate cross-border payments and remittances.
However, there are concerns about the lack of regulation in the stablecoin market. The Bank of England’s comments highlight the need for robust regulation to ensure that stablecoins are safe and reliable for consumers.
The Bank of England is not the only central bank to express concern about stablecoins. The US Federal Reserve has also raised concerns about the potential risks associated with stablecoins.
In a recent report, the Federal Reserve noted that stablecoins could pose a threat to financial stability if they were to become widely adopted without proper regulation. The report also highlighted the potential for stablecoins to be used for illicit activities such as money laundering and terrorist financing.
The Bank of England’s comments come at a time when stablecoins are becoming increasingly popular. Facebook’s proposed stablecoin, Libra, has generated significant interest and concern from regulators around the world.
The Libra Association, which is responsible for overseeing the development of the stablecoin, has been working to address regulatory concerns. However, the project has faced significant opposition from regulators, with some countries even considering banning the stablecoin altogether.
The Bank of England’s comments are likely to add to the regulatory pressure on stablecoins. It remains to be seen how the stablecoin market will evolve in the coming years, but it is clear that regulatory scrutiny will be a key factor in shaping the future of this emerging market.