(Adds more detail from speech)
By Huw Jones and Iain Withers
LONDON, April 17 (Reuters) - There may need to be limits
initially on the use of major stablecoins for payments, and they
should also be backed by high quality and liquid assets to
protect consumers, Bank of England Deputy Governor Jon Cunliffe
said on Monday.
Britain is due to adopt rules for regulating stablecoins, a
form of cryptocurrency backed by an asset or fiat currency,
which consumers could use to make payments digitally.
"Systemic stablecoins will need to be backed with high
quality and liquid assets," Cunliffe told a conference held by
Innovate Finance, a UK fintech industry body.
"These could include either deposits at the Bank of England
or very highly liquid securities, or some combination of the
two. We are currently considering which of these options is most
appropriate," Cunliffe said.
Initially at least, it would not be possible to protect
stablecoin deposits in the case of failure by using the
industry-funded scheme which protects sterling bank deposits up
to 85,000 pounds ($105,451.00), Cunliffe said.
"This reinforces the need to ensure that the backing assets
are at all times of sufficient value to meet redemption
requests. And it also highlights the potential role of capital
requirements," Cunliffe said.
The BoE has concluded that over time the risks to financial
stability from stablecoins should be manageable.
"But we cannot know for certain the extent and the speed at
which payment stablecoins might be adopted and we may well need
limits, at least initially, to ensure we avoid disruptive change
that could threaten financial stability," Cunliffe said.
As rules for payment stablecoins are developed it was
important to also develop how tokenised bank deposits could be
regulated to allow banks and non-banks to develop payments using
new technologies, he said.
The Bank intends to set out its approach on this alongside a
consultation on the payment stablecoin regime, Cunliffe said.
($1 = 0.8061 pounds)
(Reporting by Huw Jones and Iain Withers; Editing by Sharon
Singleton)
Messaging: huw.jones.thomsonreuters.com@reuters.net))
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