As the bank says, if new forms of digital money are to become widely used as a trusted form of retail payments, it is essential that the public can have the same confidence in them as they have in existing forms of money.
New forms of digital money could potentially offer benefits in terms of cost and functionality, as the bank suggests. And there could be potential gains from a shift to more market-based financing. It is also possible that they could enhance the transmission of monetary policy.
But these opportunities can only be realised 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 Financial Policy Committee has set out its expectations for stablecoins. These aim to ensure the same level of public confidence in stablecoins as commercial bank money. The regulatory models outlined in this Discussion Paper illustrate potential ways to meet these expectations. Establishing a secure regulatory environment for stablecoins to operate within the UK would also lay a clear foundation for sustainable innovation.
Importantly, there is significant uncertainty around the demand for new forms of digital money and their impact on the economy. Precautionary arrangements may therefore be needed to allow the space for an assessment of the impact of new forms of digital money on the financial system after any launch.
The full paper can be accessed here.
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