The monetary policy debate Allow me to say a few words in conclusion regarding the recent, lively debate on monetary policy. This is because I have received many questions on this subject in recent weeks. However, it is not always easy to get a subtle message across when the media debate is so intense. I therefore decided at an early stage of the discussion to take up this question in greater depth here at the Economics association, a suitable forum for a penetrating and relatively non-media discussion. Before I try to explain my views on some elements of the discussion, I cannot resist pointing out that I found the tone of the discussion somewhat surprising. Sweden has come through the recent economic slowdown better than many other countries. Personally, I also felt much greater concern over economic developments and monetary policy at the end of spring and beginning of summer 2003 than I have done in recent months. The reason is simple. At the end of last spring, the inflation rate was still high. Although we believed it would fall, there was a clear risk that it could become entrenched. Meanwhile, there was considerable uncertainty over international economic activity; would there be a turnaround and if so, when? This could mean we are forced to make difficult judgements. For instance, we might be forced to raise the interest rate even if economic activity weakened. Now the situation is fundamentally much better, with declining inflationary pressure combined with increasing growth. Nevertheless, the debate is much tougher.
We and the FCA[11] plan to consult later this year on the regulatory frameworks we will apply to stablecoins. The Bank of England’s regulatory framework, in line with the legislation, will cover the issuance of stablecoins which are used for payments at systemic scale, the systems for transferring the coins, and also extend to systemic service providers such as custody wallets that are an intrinsic part of the stablecoin arrangement. It will give effect to two expectations for systemic or likely to be systemic stablecoins that have been set by the Bank’s Financial Policy Committee. First, that payment systems that use stablecoins should be regulated to standards equivalent to those applied for traditional payments. And second that stablecoins used as money for payments should meet equivalent standards to those provided by commercial bank money. It will follow the guidance on the relevant international standards set last year[12], including the requirement that the coins should be redeemable from the stablecoin arrangement, in fiat money, at par value and on demand[13]. This matches the requirement for commercial bank money and is crucial both to ensure confidence in the coins and their uniformity with other sterling money. Systemic stablecoins will need to be backed with high quality and liquid assets to be able to meet these expectations and standards, as set out by the Financial Policy Committee. [14] These could include either deposits at the Bank of England or very highly liquid securities, or some combination of the two.