The Bank of England has sent a clear message to lenders: don’t let customers confuse new forms of e-money, especially ‘stablecoins,’ with standard bank deposits that come with guarantees against bank failures.
Now, you might be wondering, what exactly are stablecoins? Well, they’re a type of cryptocurrency that’s backed by a fiat currency like the pound or the dollar, or even an asset. But here’s the catch: while they’re gaining attention, stablecoins are still relatively small players in the wider financial world.
The world of finance is changing rapidly, with central banks like the Bank of England contemplating the issuance of their own digital currencies. As this shift happens, regulators find themselves under pressure to keep up with developments in the private sector, especially in the realm of payments.
On Monday, the Bank of England took a proactive step by proposing a regulatory framework for systemic payment systems that use stablecoins and the related service providers, including banks and payment companies. Essentially, the idea is that if these payment systems pose similar risks to other systemic payment systems, they should adhere to equivalent regulatory standards.
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The Bank, along with the Financial Conduct Authority, also outlined how they plan to regulate stablecoins and the entities that issue them. In a letter to bank CEOs, the Bank of England emphasised that if deposit-takers or their affiliated groups want to offer e-money or regulated stablecoins to retail customers, they should do so through separate entities that are non-deposit-taking and insulated from insolvency risks.
Furthermore, the Bank of England and the Financial Conduct Authority have published initial proposals for regulating stablecoins and are seeking feedback until February 6.
Sheldon Mills, the FCA’s Executive Director for Consumers and Competition, highlighted the potential of stablecoins to make payments faster and more cost-effective for everyone. The focus here is on fostering innovation while ensuring safety and security in this evolving financial landscape.
Our Reader’s Queries
Is Standard Bank British?
In 1862, The Standard Bank of South Africa was established as a South African branch of the British overseas bank Standard Bank. Today, it is known as Standard Bank.
Does Standard Bank operate in UK?
Our London-based SALL office boasts a team of approximately 150 professionals who offer a comprehensive range of financial services and products. Our teams specialize in Investment Banking (IB), Transactional Products and Services (TPS), Client Service, International Wealth & Investment, and Corporate functions. With our expertise and dedication, we provide access to a full suite of universal financial solutions.
What is the other name for Standard Bank?
Standard Bank of South Africa Ltd has undergone several name changes over the years. It was first renamed Standard Merchant Bank in 1972, then Standard Corporate and Merchant Bank in 1995, and finally Corporate and Investment Banking in 2004.
Who controls the Bank of England?
Despite popular belief, the Bank of England is not privately owned. It was nationalized in 1946 and is now wholly owned by HM Treasury. While it was granted certain powers in 1998 that are sometimes referred to as “independent,” this does not change the fact that it is owned by the government.