Melker Bengtsson
TL;DR
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The Bank of England is set to be given a new legal duty: to support stablecoin innovation
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The change was announced on August 27 and gets written into the actual bill this week
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The Bank will have to report to parliament on progress, opening it up to challenge on stablecoin policy
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In the US, the statutory pro-crypto shift is stalled by the CLARITY Act being held up in the Senate
The UK’s central bank, the Bank of England, is set to be given a new legal duty this week: to support stablecoin innovation. The upper chamber of the UK parliament, the House of Lords, is currently reading the bill and the amendment is expected to land this week.
Lucy Rigby, the UK’s City Minister and the minister in charge of financial services policy, said:
Whilst financial stability will always remain the Bank's primary objective, this secondary objective will support the Bank to continue to drive innovation in payments and digital finance, ensuring that the UK remains a global leader in financial services.
The change was announced on August 27th and this is the week when it gets written into the actual bill. A new secondary objective to support innovation in digital money, systemic payment systems and stablecoins. Since the primary objective of the Bank of England is to protect and enhance the financial stability in the UK, as long as innovation doesn’t conflict with that, their job is now to support it.
This extends the central bank's current innovation responsibility for clearing houses and securities deposits. It also means that they’ll have to report to parliament on their progress and parliament will have an opening to challenge the Bank of England on stablecoin policy.
From Holding Caps to a £40 Billion Ceiling
The Bank of England has long been criticized for its conservative stance on cryptocurrencies, even being called the most conservative voice in the UK on the matter. And their early stablecoin proposals showed why. It had caps on how much stablecoin both individuals and companies could hold and it required issuers to park reserves with the Bank of England, earning no interest.
The suggestion resulted in massive pushback. And it had an effect: holding caps were replaced by a temporary £40 billion cap on total issuance and issuers can park up to 70% of reserves in short term UK bonds. This new objective given to the Bank of England will increasingly force this more allowing direction.
In the US, the statutory pro-crypto shift is currently stalled by the CLARITY Act being held up in the Senate. The White House is relying on executive orders and appointed officials that can be reversed by the next administration. The UK is going a different route. What to look for next is the first report from the Bank of England on how they’re actually supporting innovation in stablecoins.
