Andrew Bailey, Governor of the Bank of England, has published a speech in which he clarifies his view of cryptocurrencies and stablecoins.
A documented speech from the Governor of the Bank of England brings a look at innovation in payments, and the main topic are cryptocurrencies and stablecoins. Andrew sees three major innovations: cryptocurrencies, e-money and stablecoins.
The governor’s opinion on cryptocurrencies is not at all positive and says:
They have no connection at all to money.
They may have extrinsic value – you may like to collect them for instance, and as such they are a highly risky investment opportunity.
Their value can fluctuate quite wildly, unsurprisingly.
They strike me as unsuited to the world of payments, where certainty of value matters.
As for e-money, he called them a hybrid because the safeguarding regime does not have all the features of deposit protection.
However, the governor’s view is changing with regard to stablecoins, where he thinks that if they are used to facilitate the transfer of money, they can become a widely used means of payment.
Stablecoins could offer some useful benefits. For example, they could further reduce frictions in payments, by potentially increasing the speed and lowering the cost of payments (especially if global stablecoins were to be established).
Stablecoins may offer increased convenience, including via integration with other technology, such as social media platforms or retail services.
Andrew goes on to say that stablecoins will be a widely used currency if issuing company provide 100% certainty in converting value to fiat at any time, and will also comply with all rules to protect the recipient and consumer of stablecoin.
Stablecoins need to offer coin-holders a robust claim, with supporting mechanisms and protections to ensure they can be redeemed at any time 1-to-1 into fiat currency.
The bank already registers several major stablecoin proposals, but so far none of them has met the requirements. The governor therefore draws attention to timely regulations that will provide the necessary certainty for users as well as innovators.
Indeed, the international community has agreed that “no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks… are adequately addressed, through appropriate designs and by adhering to regulation that is clear and proportionate to the risks.
If you are interested in the whole speech by Andrew Bailey on the future of cryptocurrencies and stablecoins hosted by The Hutchins Center, click here
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