In other words: if you’re used for payments you should be regulated to the same standard as other entities conducting payments activities. It doesn’t matter what technology you are using. Same risk, same regulation. Nothing new under the sun  The second challenge for regulators is that stablecoins differ from existing payments systems in one fundamental way: Regulation of existing payment chains largely focuses on the resilience of arrangements to transfer money – how money gets from point A to point B. However, the reliability of those chains also crucially depends on the stability of the money they transfer. Existing payment systems transfer money that has been created by other entities — central banks or commercial banks. Stablecoins propose to create the digital tokens or ‘coins’ they transfer. Existing payment systems effectively outsource this issue - they only transfer money that is subject to separate protections and regulations to help maintain stability and confidence. The value of central bank money, which gives holders a claim on the state, is protected by the Bank of England’s monetary stability mandate and inflation targeting regime, while the value of commercial bank money is protected by legal rights that ensure holders can redeem this money one-for-one in the currency they deposited. Robust prudential regulation and deposit insurance in turn ensure that commercial banks can make good on this in all but rare circumstances. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  These protections are important as they underpin confidence in the system.
The defining trend of the last ten years has been the weakness of productivity. Given the size of the financial sector in the UK, I can see fintech driving competition and a 4  pick-up in productivity in the medium term . 5  And as a member of the Bank of England’s Financial Policy Committee, in line with our remit , I need to be open minded about, not just the risks, but the opportunities fintech could pose to the financial system. The FPC recently discussed the current risks posed by crypto-assets and judged that they do not pose a material 6  risk to UK financial stability . We judge that crypto-assets themselves may have limited utility, particularly as money. They are too volatile to be a store of value, and with high transaction costs and slow settlement times, they are an inefficient 7  medium of exchange . However, we also recognise the opportunities in the technologies that underpin crypto-assets. Adapting these technologies for the demands of the financial system poses significant challenges. Balancing the resilience, performance and privacy features of distributed ledger technology is not an easy problem to solve – and many developments are currently focusing on performance and privacy, at the potential cost of resilience. But the distributed ledger and cryptographic technologies used by crypto-assets have the future potential to deliver benefits both to the financial system and to the economy it serves, including increasing efficiency and resilience and contributing to a more distributed and diverse payments system.