BoE speech on the digitalisation of money and assets: proposed stablecoin regulatory framework

The Bank of England (BoE) has published a speech by Sarah Breeden, Deputy Governor for Financial Stability, at the Point Zero Forum. The subject of the speech was the digitalisation of money and assets, and in particular the BoE's focus on interoperability. In terms of general commentary, Ms Breeden highlighted the need to collaborate closely with international partners to ensure safe innovation and support for firms with cross-border transactions. She also emphasised the importance of enabling users to switch seamlessly between different forms of money and across asset classes. To drive interoperability, harmonised technical standards and working with the public sector is needed to understand further how to integrate these new, digital forms of assets and money into the wider financial system.

Ms Breeden also noted key points from feedback by the BoE following the publication of its proposed regulatory regime for systemic payment systems using stablecoins in November 2023, including in relation to:

• Existing business models. The proposed regime does not align with existing stablecoin business models. Stablecoins have diverse applications beyond becoming widely used payment mechanisms in the real economy, such as supporting settlement in the crypto ecosystem, and consideration should be given to how the UK regime can support these diverse use cases and business models while mitigating associated risks.
• The Financial Conduct Authority's (FCA) regime for non-systemic stablecoins. Differences between the BoE's regime and the FCA's regime will create challenges.
• Cross-border challenges. There are concerns that with the UK having a regime which looks and feels different to regimes being implemented in other countries, it brings challenges for firms wanting to operate cross-border businesses.

In terms of next steps, Ms Breeden confirmed that the BoE will continue its industry engagement as it develops its proposals further and sustain its focus on interoperability and the singleness of money (that is, being able to redeem with legal certainty, in fiat at par, and without friction).

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