On 17th April, Jon Cunliffe, Bank of England’s deputy governor delivered a speech on stablecoins and future payment systems. In a statement given at Innovate Finance Global Summit, London Cunliffe stressed innovation in payment and money.
According to Jon Cunliffe, regulators may have to restrict the use of stablecoins in payment systems to manage financial stability. While making his statement on the current payment system, the deputy governor of the Bank of England said that “there’re many dusty and forgotten corners in payment that have been transformed in recent years”. Additionally, more radical changes are due in the future. Jon Cunliffe’s speech was majorly focused on the United Kingdom but he said that this is applicable across borders too.
Several countries worldwide need help to formulate a comprehensive policy on digital asset management. Now the Bank of England’s deputy governor’s indication for a possible limiting of stablecoins to protect the financial system may provide a setback to many countries, especially to those countries who are currently looking forward to shifting their focus to a stablecoins-based economy. However, according to Jon Cunliffe forecasting and the pace of technological advancements and the way it interacts with socio-economic trends is itself a more complex process to judge.
Authorities like the Bank of England, which is charged with maintaining financial stability and with the regulation of the financial system need to be forward-looking. According to Jon Cunliffe, there are two reasons why we need forward-looking policies to manage the volatility in the sector. The first is that no one can be certain how new technologies and socio-economic trends will behave. Additionally, bodies must take one step ahead to counter and reduce the risks and focus more on those areas where the likelihood of significant changes is high. He also warned that controlling any technology once they are fully established is very difficult to handle.
Additionally, in his statement, Jon Cunliffe said, “We want competition and innovation in financial services”. The reasons provided by him are that it will increase efficiency, functionality, and resilience. Apart from alarming the repercussions of stablecoins in the financial system, he also informed that nearly 90% of people make up almost one-third of all payments made in the United Kingdom. Nearly a third of UK adults use mobile payment apps such as ApplePay or GooglePay.
The United Kingdom government is set to bring the “Financial Services and Markets Bill” in the next few weeks which will provide more power to the Financial Conduct Authority (FCA) to regulate the crypto sector. Currently, the Financial Conduct Authority only has the power to ensure the company is registered with it and anti-money laundering rules. It will be interesting to see what will be the approach of the United Kingdom in making future policies to manage stablecoins and related sectors.
