- Bank of England Paper Assess Stablecoins and CBDC Impact.
- The paper looks at how digital currencies impact financial systems.
- Also, The Bank of England prosed a regulatory system to make stablecoins ‘safer’
Specifically, the paper looks at how digital currencies could affect the cost and availability of lending and could influence monetary policy. The Bank of England emphasized that public confidence is vital to monetary and financial stability. As such, for digital currencies to become widely used they must offer the same level of confidence existing forms of money provide.
Also, the paper notes that digital currencies could add needed benefits to the existing financial system. For instance, digital currencies could contribute to faster, cheaper, and more efficient payments. Plus, a move to market-based financing could result in lower interest rates and greater financial inclusion. However, to achieve this the report states,
“But these opportunities can only be realized if new forms of digital money are safe. They could be privately provided – in the form of ‘stablecoins’. Or they could be publicly provided – in the form of a central bank digital currency.”
The Bank of England acknowledges that although digital currencies offer many potential benefits they, however, also carry risks. Thus, The Financial Policy Committee expects stablecoins to inspire the same level of confidence as commercial bank money. In this case, commercial bank money refers to either cash or deposits held in commercial banks.
To achieve this, the paper also proposes regulatory models that show how stablecoins can meet these expectations. Also, the paper highlights that building a secure regulatory environment for stablecoins will allow for sustainable future innovation. In addition, a regulated system will allow the country to assess the impact of digital currencies on the economy and financial system.
Finally, the bank is inviting financial services stakeholders to respond to their findings.