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Stablecoins Need Same Rules As Other Currency, BOE Says

The Bank of England wants stablecoins to be governed by the same regulations as other payments handled by banks if and when they become widely used.

According to Reuters, the central bank also said on Monday (June 7) that it has yet to decide whether to issue its own central bank digital currency (CBDC), which was nicknamed “Britcoin” by finance minister Rishi Sunak earlier this year.

“The prospect of stablecoins as a means of payment and the emerging propositions of CBDC have generated a host of issues,” said BOE Governor Andrew Bailey. “It is essential that we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money.”

Like their name suggests, stablecoins are designed to have value that stays stable with traditional currencies or commodities like gold, thus evading the volatility that comes with bitcoin.

As Reuters noted, most stablecoins haven’t made an impact on “day-to-day commerce,” although Facebook’s suggestion in 2019 that it would create its own digital currency for its platforms caused some alarm among regulators.

The Bank of England said that if digital currencies grow to the point that they can impact financial stabilities, more regulations will be needed. “Stablecoins used as money should meet equivalent standards as those provided by commercial bank money, otherwise known as bank deposits,” the bank said.

That would mean entities issuing stablecoin would need to offer deposit insurance and meet capital and liquidity rules. That’s in keeping with some legislation being proposed in the U.S. that would require stablecoin issuers to get approval from the Federal Reserve and Federal Deposit Insurance Corporation (FDIC).

As for the CBDC question, the Bank of England is among a host of central banks around the world considering issuing digital cash, with the goal of avoiding threats to traditional money and providing smoother payment systems. The People’s Bank of China has done the most high-profile work in this arena, and the U.S. Federal Reserve has said recently it would step up efforts toward the digital dollar.

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