During a press conference at the Institute of International Finance in Washington on April 12, Andrew Bailey, the governor of the Bank of England, recommended that stablecoins be regulated similarly to fiat money. Bailey mentioned that stablecoins lack an «assured value» and emphasized the need for a proper regulatory framework, similar to traditional financial products, to ensure financial stability.
«As we have seen, they [the stablecoins] do not have assured value, and in the work we have done at the Bank of England we have concluded that the public should expect assured value in digital money, and confidence in this is needed to underpin financial stability.»
Are Tokens Real Money?
Stablecoins must meet the same characteristics and regulations as real money to function properly, as noted by Andrew Bailey. He also stated that regulators should consider appropriate liquidity buffers to respond to any banking crisis or bank run, such as the Silicon Valley Bank incident that affected numerous investors.
The Bank of England is currently evaluating the possibility of issuing a Central Bank Digital Currency (CBDC) in light of the advancements in digital money technology. Blockchain offers a decentralized, auditable way to transfer money more efficiently, but centralization remains the standard for legal, geopolitical, and practical reasons.
Bailey stated that although CBDCs are not the only form of digital money, they are likely necessary to act as a «value anchor» for all forms of money, including new digital currencies. He stressed the importance of providing maximum opportunities for innovation in payment services.
Regulators vs. Stablecoins
Stablecoin regulation has been discussed by regulators for several years, but an agreement on necessary steps to safeguard investors has not been reached. Kristin Smith, Executive Director of the Blockchain Association, suggested that U.S. watchdogs are more focused on the illicit uses of stablecoins, such as money laundering or terrorism financing, than their everyday use as digital money. She also highlighted the importance of adequate regulation to avoid stifling technological innovation in the crypto market and stablecoins.
Jeremy Allaire, CEO of Circle, recently stated that the Securities and Exchange Commission (SEC) should not regulate stablecoins, as there are other custodians better suited for the role. Circle is the company behind USDC, the world’s second-largest stablecoin.