Stablecoins Offer ‘Efficiency and Functionality’ in Payments, Says Bank of England

“The question is not whether but how we should develop the machinery for tokenized transactions to settle in central bank money,” says Bank of England’s John Cunliffe

article-image

lazyllama/Shutterstock modified by Blockworks

share

Stablecoin use cases — specifically stablecoins for payments — were likened to the evolution of the iPhone by Bank of England Deputy Governor John Cunliffe in a recent speech.

Alongside the digital pound, which the Bank of England (BOE) is currently working on, Cunliffe said that stablecoins for payments are one of four focus areas for the BOE when it comes to digital assets. 

Stablecoins offer “the possibility of greater efficiency and functionality in payments,” according to Cunliffe. However, because they sit outside of regulations at present, there is a slim likelihood that any of the current offerings would pass the standards that an entity such as the BOE would set. 

“Systemic stablecoins will need to be backed with high quality and liquid assets to be able to meet these expectations and standards, as set out by the Financial Policy Committee,” Cunliffe said in the speech. The BOE is working on a regulatory framework that would focus on stablecoins used for payments. 

In May of last year, UK regulators proposed regulatory oversight of payment systems, such as stablecoins, where “deficiencies in its design or disruption to its operation may threaten the stability of the UK financial system” should fall under the BOE.

According to Cunliffe, there is also misunderstanding of the BOE’s approach to digital assets.

“The question is not whether but how we should develop the machinery for tokenized transactions to settle in central bank money — in other words what will provide the most efficient, effective and fastest route to this end, given our current starting point,” he said. 

The possible regulation that Cunliffe refers to is similar to what United States policymakers are working on. 

TerraUSD, an algorithmic stablecoin that was pegged to the US dollar through LUNA, infamously lost its dollar peg and collapsed, wiping out billions of dollars and starting a domino effect that would lead to the bankruptcies of Three Arrows Capital as well as crypto lenders Voyager and Celsius. 

The draft of a stablecoin regulation bill, which was published ahead of a hearing on Wednesday, April 19, showed that lawmakers appear to be on the same page as the BOE. New algorithmic stablecoins, which are based on a secondary token, would face a two-year moratorium.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495M in value locked, doubling Uniswap's Base deployment.

article-image

Also, former Valkyrie CEO lands new leadership role at Canadian investment firm Cypherpunk Holdings

article-image

This week’s biggest funding round saw Jump Trading, JPMorgan contribute to the round

article-image

Plus, a layer-1 for intellectual property is launching and Farcaster users peaked

article-image

Crypto still hasn’t shaken one of its most garish primordial tails — funny stories about fraud

article-image

Plus, publicly traded crypto companies had a pretty eventful news week

article-image

Committee members directed more questions to Christy Goldsmith Romero, who could soon be leading one of the more troubled federal agencies