Bank of England Governor Says Stablecoins Could Reduce UK Reliance on Commercial Banks – Could It?

Core Viewpoint - The Bank of England is considering granting stablecoins access to central bank accounts, which could significantly alter the financial landscape in Britain [1][2]. Group 1: Stablecoins and Financial System - Stablecoins have the potential to separate money holding from credit provision, which may reduce the role of commercial banks in the economy [1][3]. - The current financial system in Britain relies on fractional reserve banking, where commercial bank deposits support lending to households and companies [3]. - The introduction of stablecoins could lead to a scenario where banks and stablecoins coexist, allowing non-banks to engage more in lending activities [3]. Group 2: Regulatory Framework - The Bank of England plans to publish a consultation paper outlining a systemic stablecoin regime, establishing standards for stablecoins used for everyday payments and tokenized financial markets [2]. - Proposed ownership limits for systemic stablecoins are set at £10,000 to £20,000 for individuals and £10 million for businesses to mitigate financial stability risks [4]. - The governor emphasized that backing assets for stablecoins must be devoid of credit, interest, and exchange rate risks, and should include insurance schemes similar to bank deposits [5]. Group 3: Technological Considerations - The technology behind stablecoins raises traditional central banking concerns regarding the relationship between money and credit creation [6]. - Exchange terms for stablecoins must be transparent, consistent, and directly convertible into other forms of money, rather than relying on crypto exchanges [5]. Group 4: Industry Response - The crypto industry has expressed opposition to the proposed caps on stablecoins, arguing that such measures would negatively impact UK savers and the financial sector [7].