However, the technology did not go away but rather re-emerged in a different form, focussed on the development of platforms which have now come to dominate internet commerce. So the interesting question for regulators is not what will happen next to the value of crypto assets, but what do we need to do to ensure that these developments, this prospective innovation about which I shall say a little more later, can happen without giving rise to increasing and potentially systemic risks. This brings me to my third lesson: the extension of the regulatory framework to encompass the use of crypto technologies must be grounded in the iron principle of ‘same risk, same regulatory outcome’. The starting point for regulators should be to apply the same regulation to the risks inherent in the provision of a financial service no matter how it is provided. But differences in technology may mean that existing regulation may not work in this new context or, indeed, may not effectively manage the risk. Implicit in our regulatory standards and frameworks are the levels of risk mitigation we have judged necessary. Where we cannot apply regulation in exactly the same way, we must ensure we achieve the same level of risk mitigation – in other words, the “same regulatory outcome”.
All of this this work is being closely co-ordinated by the Financial Stability Board (FSB), which, as it set out in yesterday’s statement[8], is working to ensure cryptoassets are subject to robust regulation and consultation. The FSB will publish a consultation report later this year with recommendations for promoting international consistency in regulatory and supervisory approaches to non-stablecoin cryptoassets, markets and exchanges as well as for strengthening international coordination in this area. And, putting on my domestic hat, given that the the Bank of England is responsible for regulation and supervision of systemic payment systems in the UK, our intention is to apply the ‘same risk, same regulatory outcome’ approach in the UK. The Government has announced its intention to legislate in the current session of Parliament to update the powers of the Bank of England and the Financial Conduct Authority to regulate and supervise stablecoins. We hope to issue a consultation document on the regulatory policy framework later this year. Taken as a whole, the UK authorities have made clear that they are prepared to see stablecoins – issued by either banks or non -banks - operate in the UK, provided they are properly regulated and supervised[9]. This should not, however, be interpreted as any weakening in standards for risk mitigation. I doubt any of the stablecoins currently in operation in other jurisdictions would meet the necessary standards for operation at systemic level in the UK – whether in the crypto world, should that become systemic, or in conventional financial services.