Bank of England Explores Stablecoins for Wholesale Transactions
In a noteworthy announcement this week, the Bank of England has signaled its willingness to explore the integration of stablecoins for wholesale transactions. This perspective comes from Sasha Mills, the central bank’s executive director, who emphasized that while financial stability remains paramount, there is a necessity for the institution to embrace innovation following legislative updates.
This attitude stands in stark contrast to a recent report by the Bank for International Settlements, which categorized stablecoins as unreliable, raising concerns about their viability as a stable currency.
Policy Adjustments and Cautions
For the first time, the Bank of England has adjusted its policy on stablecoins, easing the restrictions related to their use in wholesale markets. Nevertheless, a preference for central bank-issued currency for settlements persists. Alongside this shift, the bank has modified reserve requirements within the retail sector, which may now allow for limited investments in high-quality assets.
In order to safeguard against potential deposit losses, temporary holding limits are being contemplated for individuals and businesses.
Despite these developments, Bank of England Governor recently warned that the rise of stablecoins poses risks to public trust in established currencies, highlighting the need for a cautious approach as the central bank navigates this emerging financial landscape.
(Source: Ledger Insights)
