Some versions of these crypto-assets – so called ‘stable coins’, which aim to maintain the value of the asset – are intended to function as payment systems. They both replace the current bank to bank machinery for holding and transferring the settlement asset or ‘money’, and at the same time create a new form of ‘money’ – the stablecoin – to be transferred. Technological innovation in recent years has, in short, enabled and can further enable huge changes in the way we transact in the economy and in the types of money we use and how we are able to use them. Such change offers great opportunity. But it also poses some very important questions for the Bank of England, sitting at the centre of ‘money’ in the UK. The change also poses questions more broadly for the UK regulatory authorities, government and parliament. That is why HM Treasury are leading the Payments Landscape Review.9  This is not new; the great debates about money that we have had every couple of centuries have always involved the political authorities as well as the technical ones. The key questions are as follows. First, how do we ensure the availability and acceptability of physical cash for as long as people want to use it? Second, how can we ensure that the money remains reliable and stable while taking the opportunity offered by technology to improve the efficiency, effectiveness and functionality of payments – that is money as a means of exchange?
Legislators and other policymakers made substantial changes to the financial system to hold firms, and their managers and shareholders, more accountable. A great many of those changes have put both firms and the public sector in a better place. Today, regulators and supervisors expect systemically important financial institutions to be more resilient. They must be prepared for unanticipated losses and shocks to the financial system, including through rigorous (if not always popular) capital and liquidity standards. Supervised firms are also required to have a much greater understanding of the governance and controls supporting their critical operations. This includes, for example, governance frameworks, management information systems, and IT resiliency. This last point is particularly notable because, as many of you are now painfully aware from the data breaches at Equifax and Yahoo (and those are just the most recent ones), cybersecurity risk has increased dramatically in the last several years. Resilience goes a long way. It prepares firms to be ready to fight not only the last war, but also the unanticipated stresses of the next one. It prepares them not to rely on past performance as a guaranty of future performance. But, increased preparedness should not be cause for overconfidence. Supervision and regulation should not and cannot drive all risk from the financial system, and the probability of a systemically important institution’s failure will never be zero.