There has been much uproar in recent years among central bankers, regulators and lawmakers about stablecoins, particularly Facebook’s efforts to launch the oft-designed stablecoins that are at the core of many of its social media platforms. Will be
Not everyone in the financial world is so upset though. new one speech The title for the Westminster eForum Policy Conference by Christina Segal-Knowles – Executive Director of the Bank of England’s Financial Markets Infrastructure Directorate – is titled “What Old is New Again” and is intended to quell some of the excitement and agitation surrounding the issue. .
Turning its focus on stable coins designed to be used for payments, Segal-Knowles argues that financial regulators are perfectly well aware of how to ensure that private money is not accessible to public use. is safe and stable enough:
“Stablecoins Aren’t Launching Us Into Some Brave New World” […] The key here is to make sure that just because something is packed in flashy technology, we don’t in any way treat its risks differently. “
Segal-Knowles recognized that the idea of stablecoins – and, more generally, private money –”feels Innovative and attractive” and attributes this to simplifications in popular culture about how money works and the forms it takes already at present. In most cases, most people really rarely see central banks such as the Bank of England. use of public funds from, but rather than commercial banks, private IOUs.
Segal-Knowles noted, “Ninety-nine percent of the funds held by homes and businesses that would typically be used to make payments are now held as commercial bank deposits rather than in cash.” After the pandemic, the use of cash is only decreasing further.
Segal-Knowles titled part of his speech “Why do we care?” When it comes to private money, she says that central to the issue is the security that its current forms can provide to its users. Private money in circulation today guarantees uniformity and is reliably interchangeable with cash. Deposit protection schemes and regulation and liquidity requirements provide even greater protection.
Most of the time, households and businesses have rarely lost faith in the state’s backstop of their currency – with the significant exception that in recent history, emerging market crises have in some cases allowed states to maintain the value of their national currencies. ability has been cast in doubt. The US dollar, as it was with Argentina in the early 2000s. In the financial crash of 2007–2008, a bank operating on Northern Rock signaled a similar crisis of confidence, leading to governments’ notorious bailouts from banks.
For Segal-Knowles, these risks and issues posed by stablecoins are “not fundamentally new” but continue with challenges that regulators have long faced in securing private funds for widespread use. have to do. Subsequently, a similar toolkit – a legal claim basis, capital requirements for issuers, deposit protections, etc. – can be adapted and tailored to regulate stablecoins of systemic importance. Segal-Knowles notes that this toolkit will not be the same:
“If stablecoin operators are restricted to backing themselves in high-quality liquid assets, they would not need regulation to cover credit risk. If they only held themselves back in central bank reserves which are inherently liquid, do not require liquidity facilities. Ultimately, the specific requirements may differ from those applicable to banks, but the outcome will be the same.”
In a recent speech dedicated to the same issue, Bank of England deputy governor John Cunliffe behaved slightly differently, arguing that the increasing shift from public money to various forms of private money raises important questions for states and central banks. .
Cunliffe suggested that technology-driven development and changes in the use of various forms of money, including non-bank private money, could General access to digital form of central bank money Important to ensure financial stability in the future.