The Bank of England said that payments with ‘stablecoins’, which is a form of cryptocurrency usually pegged to a traditional currency, should be regulated in the same way as payments handled by banks if they start to become widely used.
The central bank also said that it had made no decision about whether to issue its own central bank digital currency, or CBDC, a prospect dubbed ‘Britcoin.’ The BoE stated this when finance minister Rishi Sunak asked it to look into this in April. Andrew Bailey, BoE Governor said that the prospect of stablecoins as a means of payment and the emerging propositions of CBDC have generated a host of issues. When it comes to the future of these new forms of digital money, it is essential that they ask the difficult and pertinent questions to ensure it.
Stablecoins are also a type of cryptocurrencies, that is designed to have a stable value. It is also to avoid the volatility that makes bitcoin and other digital tokens impractical for most commerce. None have gained much traction in day-to-day commerce. In 2019, Facebook made a proposal to create a digital currency for use on its platforms alarmed financial regulators. The BoE said that digital currencies would require greater regulation than at present, because of its role on financial stability.
Stablecoins used as money should meet equivalent standards as those provided by commercial bank money. Its issuers would need to meet capital and liquidity rules, and also should offer deposit insurance. The BoE is one among the major central banks across the world revving up work on issuing digital cash. This is a move which is aimed at fending off potential threats to traditional money. So that payments can be made smoother.
The People’s Bank of China is leading the charge, and the U.S. Federal Reserve also said that it would accelerate its work on a digital dollar. The BoE said that a reluctance to shift towards the technology and its complexity may stifle movement towards new forms of digital money.