The Bank of England (BoE) governor Andrew Bailey went to great lengths on Tuesday afternoon to stress that digital currencies will not get a regulatory "free pass" in the future, despite their potential for innovation.
In a keynote speech at TheCityUK's annual conference, Bailey noted that innovation needs to serve the public interest, and any discussion of a digital currency will be subject to a great deal of scrutiny.
Bailey said that the bank needs to "provide a lead in setting out the rules of the road," noting that playing catchup on digital currencies is not a recipe for success.
He went on to say that stablecoins have the potential to become systemic in terms of their importance in the financial system and its stability, and that UK authorities are already considering the regulatory approach for both systemic and non-systemic stablecoins.
In remarks about bitcoin, the most popular cryptocurrency, the BoE's governor noted the bank's position that it is not money, and has no intrinsic value because it has no backing.
The comments echo previous research released by the bank of England, noting that a range of issues and uncertainties remain in the way of the creation of a "digital pound" — dubbed "britcoin" by the press.
Earlier this month, the BoE said it has still not made a decision on a central bank digital currency's viability.
A discussion paper, released with the purpose of broadening debate on central bank digital currencies (CBDCs) potential use in the UK, explored the role of money in the economy, public policy objectives and implications, regulation and the implication of macroeconomic stability.
One of the biggest risks of a digital pound, the bank said at the time, would be the potential for digital money to undermine confidence in money and payments and in the financial system as a whole.
It also said any stablecoin-based payment chain should be regulated to standards equivalent to those applied to traditional payment chains.
In April, the bank said it would launch a taskforce in collaboration with the Treasury, exploring the viability of a "digital pound."
At the time, the BoE said any CBDC would be a new form of digital money that could be used by both households and businesses. It would exist alongside cash and bank deposits, rather than replacing them.
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