The Gillmore Centre has respondedLink opens in a new window to the Bank of England’s discussion paper on the Regulatory regime for systemic payment systems using stablecoins and related service providers.

 The rise of stablecoins and their future in payments

Stablecoins have emerged as a new form of digital asset that purports to maintain a stable value against a fiat currency (such as the US dollar, or pound sterling). They have been a pivotal innovation for the digital asset ecosystem where they are widely used as means of payment (as a settlement asset) in the trading of other digital assets (e.g. Bitcoin).

Potentially however some sort of stablecoins could in future become widely adopted for use in retail payments and the general economy.

Implications of stablecoin adoption in payments

Whether this sort of adoption happens will depend in part on stablecoins attractiveness as means of payment and store of value but would have wide ranging implications. Consumer protection, financial stability, and the broader implications for monetary policy and the banking sector (where money is currently created and managed today) need to be considered.

Regulatory response - shaping the future of money, payments and finance

The rapid rise of stablecoins (and some dramatic collapses) is thus prompting authorities around the world to move to regulate stablecoins. The choices they make will play an important role in moulding the future of money and payments and finance more broadly.

In the EU, new regulations on stablecoins (under MiCA) will come into force this year. In the UK, recently legislative changes have brought sterling stablecoin issuers within the remit of the FCA and extended the remit of the Bank of England on systemic payment systems to include stablecoins and related service providers.

The BoE have issued a discussion paper setting out their plans on the regulatory framework for systemic stablecoins backed by fiat currency and associated service providers.

 Our comprehensive responseLink opens in a new window

At The Gillmore Centre, we have engaged thoroughly with the Bank of England’s discussion paper. Our response Link opens in a new windowencapsulates a comprehensive analysis and constructive insights on the establishment of a robust, equitable, and forward-looking regulatory framework.

We would be pleased to hear from anybody interested to discuss or collaborate on any of the points raised in our response or other relevant issues. Write to us at gillmorecentre@wbs.ac.uk or contact corresponding author (see report) directly.

 Other policy engagement on this topic

 The Gillmore Centre Financial technology responded to HM Treasury and Bank of England consultation on the Digital Pound.

 There are significant interactions between proposals on the design of the digital pound and proposed regulatory regime for systemic stablecoins. The Gillmore Centre, has also engaged thoroughly with the Bank of England’s 2023 discussion paper on the digital pound. You can read our comprehensive response here.