On April 12, Andrew Bailey, Governor of the Bank of England, told a press conference at the Institute of International Finance in Washington that stablecoins should be regulated the same way as fiat money.
According For Bailey, stablecoins do not have “guaranteed value”, one of the main characteristics people look for when investing in this type of “digital currency” which seeks to resemble fiat. He argues that for this reason, the country needs to focus on putting in place an appropriate and strict regulatory framework – very similar to that of traditional financial products:
“As we have seen they (stablecoins) have no guaranteed value, and in the work we have done at the Bank of England we have concluded that the public should expect guaranteed value in digital currency, and trust in this is necessary to support financial stability.
Are the chips real money?
Andrew Bailey warned that stablecoins must meet the same specifications and regulations as real money in order to function properly as such. This situation has not yet happened with any stablecoins.
Additionally, he noted that regulators should consider all appropriate liquidity buffers to respond to any banking crises or bank runs, such as the recent one involving Silicon Valley Bank, which affected thousands of investors.
Currently, the Bank of England is following the development of digital currency to come to a conclusion on the possibility of issuing a central bank digital currency (CBDC). Digital currency has been around for decades, but the technology used to manage it has changed. Blockchain offers a decentralized and verifiable way to move money more efficiently, but centralization is the norm for legal, geopolitical, and ultimately practical reasons.
Bailey said that while digital currency shouldn’t exist solely in the form of CBDCs, there is likely a need to create an “anchor to the value of all forms of currency, including new forms of digital currency, and to ‘ensure maximum opportunities for innovation in payment services’. .”
Regulators vs Stablecoins
As reported by CryptoPotato, regulators have been discussing the regulation of stablecoins for several years, but they have not yet reached an agreement on the measures necessary to protect investors. According to Blockchain Association Executive Director Kristin Smith, this may be because U.S. watchdogs focus more on illicit uses of stablecoins, such as money laundering or terrorist financing, than on their everyday use as digital currency.
Additionally, she added that cryptocurrencies are “much more transparent than what we see in the traditional financial services system.” However, she noted that the crypto market and stablecoins must be adequately regulated to avoid stifling technological innovation.
On the other hand, Jeremy Allaire, CEO of Circle, said recently that stablecoins should not be regulated by the SEC, because the agency is not qualified to fulfill this role and it is not its responsibility, and there are other custodians in the country better suited for this. Circle is the company behind USDC, the second largest stablecoin in the world.
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