The Bank of England expresses a positive attitude towards stablecoins in agency payments, prioritizing a balance between innovation and financial stability.

The Bank of England is making an important policy adjustment by opening up to the use of stablecoins in agency payments, while still emphasizing the priority of protecting financial stability and developing a sustainable fintech ecosystem.

MAIN CONTENT

  • The Bank of England relaxes restrictions on stablecoins in the agency payment market, promoting financial innovation.

  • Prioritizing financial stability is a prerequisite before adjusting laws and regulations.

  • Developing an ecosystem that integrates new technologies by building a synchronous DLT-RTGS system, pushing London into a new generation financial center.

What is the Bank of England's perspective on the use of stablecoins in agency payments?

The Bank of England shows openness to the application of stablecoins in agency payments, marking a turning point in modern monetary policy.

According to Ms. Sasha Mills - CEO of the Bank of England, this organization supports the integration of stablecoins in agency payments, differing from the perspective of the Bank for International Settlements (BIS). She emphasized that while the top priority is to maintain financial stability, the central bank still needs to be flexible to embrace technological innovations once the laws are appropriately adjusted. This opening contributes to promoting the sustainable development of the financial sector and balancing safety and innovation.

The Bank of England not only focuses on financial stability but also needs to create conditions for innovation to continue developing, which will help build a modern, more efficient financial ecosystem.

Ms. Sasha Mills, CEO of the Bank of England, July 2024

How does the new policy of the Bank of England affect the payment and asset distribution markets?

The policy to relax the limits on the use of stablecoins and change reserve regulations in the retail market helps balance risks and create opportunities for high-quality investments.

This is the first time the Bank of England has relaxed regulations on the use of stablecoins in the agency payment market, allowing for payments using blockchain (DLT) technology to be synchronized with the traditional RTGS clearing system. In the retail market, reserve requirements are more flexible, allowing individuals and businesses to invest in high-quality assets to enhance capital efficiency. However, temporary limits on the level of holdings are also set to protect depositors from unnecessary declines in risk.

How is the development of the DLT-RTGS synchronous payment system project proceeding?

The Bank of England is building a platform to help distributed ledger technology (DLT) payments connect seamlessly with the RTGS system to increase efficiency and transparency.

The synchronization between Distributed Ledger Technology and the RTGS clearing system will facilitate faster, more secure payment transactions and easier on-chain verification. This is a preparation step for applying new technology into the national financial system while minimizing costs and risks compared to traditional methods.

What concerns does the Bank of England have regarding the development of stablecoins?

The Bank of England warns that stablecoins could negatively affect public trust in the national currency.

On July 3, 2024, the Governor of the Bank of England emphasized that stablecoins could undermine public trust in the British pound if not closely controlled. While agreeing with the potential of technology, the Bank still urged the financial sector to manage risks carefully to avoid negatively impacting the stability of the national financial system.

"Stablecoins pose risks of disrupting trust in traditional currency; careful regulation and supervision are necessary to ensure the safety of the financial system."

Governor of the Bank of England, 3/7/2024

What are the potential and challenges as London builds a next-generation financial ecosystem based on Blockchain technology?

London is expected to transform into a modern financial center through the application of blockchain combined with diverse technologies to create an effective 'hybrid ecosystem'.

Ms. Sasha Mills proposed that the financial industry collaborate to build an ecosystem combining public chain networks and new technologies, aiming to develop a transparent, efficient, and accessible financial system. This plan requires London to not only stop at technology demonstration projects but to focus on creating practical products and next-generation financial services that can operate immediately in reality.

Policy Criteria Before New Policy Application of Stablecoin Restricted in Agency Payments Open for Use of Stablecoin in Agency Payments Reserve Regulation Strict reserve requirements, investment restrictions Relaxed to allow investment in high-quality assets Personal/business holding risks Not clearly limited Temporary limits to protect depositors

Frequently Asked Questions

  • Does the Bank of England plan to officially issue stablecoins?
    The Bank of England has not announced the issuance of its own stablecoin but is opening up to promote the application of stablecoins in agency payments, in a direction that supports innovation and financial safety.

  • Is the use of stablecoins really safe for agency payments?
    With strict oversight and regulation, stablecoins can ensure safe agency payments, helping to shorten transaction times and costs, according to assessments by international financial experts.

  • How does the Bank of England ensure financial stability when applying stablecoins?
    The bank applies reserve limits, controls individual/business holdings along with a strict technical and legal risk management system to protect the system.

  • What advantages do DLT and RTGS have when synchronized?
    Synchronizing DLT and RTGS helps speed up transactions, reduce costs, and enhance the transparency and safety of the national payment system.

  • How can London become a new technology financial center?
    By collaborating across industries, promoting innovation, and building a technology platform that combines public and private elements, London will develop a modern, sustainable financial ecosystem.

Source: https://tintucbitcoin.com/ngan-hang-anh-xem-xet-dung-stablecoin/

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