Stablecoins Should Meet Same Regulations as Real Money, Bank of England

On April 12, Bank of England Governor Andrew Bailey stated during a press conference at the Institute of International Finance in Washington that stablecoins should be regulated in the same way as fiat currencies.

according For Bailey, stablecoins lack a “guaranteed value,” which is one of the key characteristics people look for when investing in this kind of “digital money” that seeks to look like a security. Because of this, he argues, the country needs to focus on providing a sound and rigorous regulatory framework – very similar to that of traditional financial products:

“As we have seen, they (stable currencies) do not have guaranteed value, and in the work we have done at the Bank of England, we have concluded that the public should expect guaranteed value in digital money, and confidence in this is needed in order to support financial stability.”

Are tokens real money?

Andrew Bailey warned that stablecoins must meet the same characteristics and regulations as real money in order to properly function as such. This situation has not happened yet with any stablecoin.

Moreover, he noted that regulators should consider all appropriate liquidity reserves to respond to any banking crisis or bank outflows, such as the recent crisis involving Silicon Valley Bank, which affected thousands of investors.

Currently, the Bank of England is following the development of digital money to reach a conclusion on the possibility of issuing a Central Bank Digital Currency (CBDC). Digital money has been around for decades, but the technology used to manage it has changed. Blockchain provides a decentralized and auditable way to transfer funds in a more efficient way, but centralization is the norm for legal, geopolitical and ultimately practical reasons.

Bailey stated that while digital money should not exist solely in the form of central bank digital currencies, it is likely that it will be necessary to create an “anchor of value for all forms of money, including new digital ones, and to ensure maximum opportunity for innovation in payment services.” “

Regulators versus stablecoins

As I mentioned Potato encryptionRegulators have been discussing regulation of stablecoins for several years, but have not yet reached an agreement on the steps needed to protect investors. According to Kristin Smith, Executive Director of the Blockchain Association, this may be because US watchdogs are focusing more on illicit uses of stablecoins, such as money laundering or terrorist financing, than their everyday use as digital money.

In addition, she added that cryptocurrencies are “more transparent than what we see in the traditional financial services system.” However, she noted that the cryptocurrency and stablecoin markets must be adequately regulated to avoid stifling technological innovation.

On the other hand, Circle CEO Jeremy Allaire recently stated that stablecoins should not be subject to regulation by the SEC, as the agency is not qualified to perform this role and it is not their responsibility, and there are other custodians in the country that are better. suitable for that. Circle is the company behind USDC, the second largest stablecoin in the world.