Deep Patel, Partner & UK Payments Lead at global management and technology consultancy Capco, comments on the Bank of England’s policy statement and draft rules on regulating systemic stablecoins.
Deep Patel, Partner & UK Payments Lead at Capco says: “The Bank of England’s policy statement and draft Code of Practice indicate it is not shutting the door on stablecoins. Instead, it is laying the foundations to move them from experiment to infrastructure by creating a route for them to become part of the UK payments system. In doing so, the BoE is signalling that it wants innovation, but only where stablecoins are backed by proper safeguards and can operate with the level of trust expected of money.
“The proposals, including a 70% short-term UK government debt and 30% Bank of England deposit backing model and a temporary £40bn issuance guardrail, are a pragmatic attempt to make stablecoins commercially viable while maintaining financial stability.
“More broadly, the BoE appears to be signalling that the future of payments will involve different forms of money sitting alongside each other – including bank deposits, tokenised deposits, regulated stablecoins and potentially a digital pound – with stablecoins increasingly being seen as a potential payments infrastructure.
“For payment firms, this creates opportunities around faster settlement, cross-border payments and programmable payments. For banks, it opens up new opportunities in custody, safeguarding, liquidity and settlement services, while also increasing pressure to develop tokenised deposit propositions of their own.
“However, it’s important that firms understand that this is not a light-touch regime. Firms will need to meet high standards on backing assets, safeguarding, redemption and operational resilience, while proving they can support reliable redemption at face value, including under stress, alongside managing AML/KYC, liquidity, reconciliation, payment cut-offs and third-party dependencies.
“Ultimately, the Bank of England’s announcement is a constructive step, giving sterling stablecoins a credible route into the UK payments ecosystem, but only for firms who are able operate with bank-grade controls.”
