Furthermore, the FSM Bill would extend current Bank and FCA regulatory regimes for payment systems and e-money to cover the use of ‘stablecoins’ for payments. The Bank will have responsibility for any such payment systems which are systemic or likely to become systemic. The Bank intends to consult early this year on the regulatory framework that will apply to such systemic payment systems. The PRA’s intention is that new standards for PRA-regulated firms will be coherent with rules for other sectors. 14. ‘Implementing Basel 3.1 in the UK – speech by Phil Evans’, 07 December 2022. 15. For clarity, I note that tailoring must always be carried out in a way that is consistent with the PRA’s objectives and ‘have regards’. 16. Financial Services: The Edinburgh Reforms. The PRA is contributing to reforming the Ring-Fencing Regime for banks, removing rules for the capital deduction of certain non-performing exposures held by banks (the PRA will consult soon on removing these rules), a review into reforming the Senior Managers & Certification Regime (the PRA published an ‘Evaluation of the Senior Managers and Certification Regime’ in December 2020 and will soon issue a discussion paper with the FCA in coordination with the Government), changes to the Building Societies Act, and work on a potential UK retail central bank digital currency. 17. PRA Consultation Paper 16/22 – ‘Implementation of the Basel 3.1 standards’, November 2022. Page 10 18. ‘Fundamental Spreads − speech by Sam Woods’, 20 February 2023. 19.
Regarding the euro area, a digital euro would also contribute to supporting monetary sovereignty and strategic autonomy, by preventing the use of external digital assets – such as private crypto assets and non-euro CBDCs – as settlement assets, and by facilitating the emergence of a pan-European payment solution at the point of sale, which could serve as a vehicle for the use of a digital euro. But such a digital euro could and should be decentralised in its implementation, in the spirit of public / private partnerships mentioned earlier. On the other side of a mountain, you will obviously always find a side that is less exposed to the sun; here, this northern face is wholesale CBDC. It currently attracts little public interest, although it poses relatively less complex legal issues, and has two strong business cases. First, a wholesale CBDC could significantly contribute to improving cross-border and cross-currency payments, a topic on which we have made progress over the past year. Following a first report delivered to the G20 in July 2021, the Future of Payments Working Group of the BIS has recently finalised a new report outlining options for access and interoperability of CBDCs for cross-border payments. Second, a wholesale CBDC could accompany the tokenisation of securities as a safe and liquid settlement asset for them on a blockchain technology. Failing to offer market participants a wholesale CBDC could open the door to an extensive use of socalled stablecoins, which would pose a systemic risk.