About a year and a half ago I stopped carrying a wallet with room for cash– all I needed on a daily basis was a debit card and my phone. I am not alone. And is this shift is not exclusive to London – from 2017 to 2019 the number of people using cash just once a month or less in the UK more than doubled to 7.4 million.1 The result has been a marked increase in digital payments, particularly card payments, and a steady decline in the use of cash for retail transactions. In mid-2016 cards overtook cash for the first time as the most frequently-used payment in the UK. And the trend hasn’t looked back. This doesn’t mean that cash is not still important for some. There are important inclusion implications that I won’t do justice to here but that deserve a mention – while UK Finance estimates that 98 percent of people in the UK had a debit card in 2019, there are still groups that continue to rely on cash, with this reliance relating  1  See UK Finance Press Release: Cards used for half of payments for first time last year. https://www.ukfinance.org.uk/press/pressreleases/cards-used-half-payments-first-time-last-year 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  to factors spanning age, income, disability and geography. The UK government has said that the UK is committed to ensuring that those who rely on cash will continue to be able to access it, and the Bank of England supports this important agenda.
5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  But of course innovation won’t be sustained if it’s unsafe or detrimental for financial stability. Clear, transparent regulatory expectations are critical to ensure that uncertain rules of the game don’t hold innovation back. This poses several challenges for regulators – I’m going to focus on the two that are most important for financial stability. We need payments to be secure and reliable. Problem 1 for central banks is that robust and reliable ways to pay are essential to financial stability. Well-functioning and resilient payment chains allow payments to be made on time, with confidence, even in periods of economic uncertainty. Think – receipt of your salary, benefits and pensions, direct debit bill payments ability to tap and ride the tube home or leave the restaurant after a meal. The reliability and resilience of payments is so important to our economy that the UK Financial Policy Committee, tasked with identifying, monitoring and reducing systemic risks, lists avoiding serious interruptions in the provision of payment and settlement services as one of the very purposes of preserving financial stability. If a stablecoin were to significantly replace current systemic payments chains as a way to pay – logic follows that they would pose the same risks to the economy as current payments chains and should be regulated to the same standards. This is relatively straightforward: regulation should be technology neutral: based on the activity conducted and the risks posed, not the technology used or the entity’s legal form.