The British government appears poised to recalibrate the balance of influence between two pivotal financial entities, namely the Bank of England (BoE) and the Financial Conduct Authority (FCA), favoring the former. This development emerges from a comprehensive 40-page response to a consultation process, which was unveiled by the esteemed His Majesty’s Treasury on the 7th of August.
This consultation, headlined ‘Payments Regulation and the Systemic Perimeter,’ was initially initiated by the UK government in 2022, aiming to garner market input on overhauling the BoE payments perimeter. This restructuring was prompted by the shifting landscape of financial stability risks.
Contained within this recently released paper are various measures aimed at overseeing entities termed “systemically important stablecoins.” The primary thrust of the government’s stance is to establish a collaborative supervisory arrangement for these stablecoins, involving both the BoE and the FCA.
Bank of England on stablecoins
Interestingly, this concept of a dual supervisory regime was first introduced in the stablecoins consultation response document of 2022. However, a unique aspect of this approach grants the BoE the authority to forestall the FCA from undertaking actions related to a stablecoin provider. Similarly, the Prudential Regulation Authority (PRA) would also wield the power to prevent the FCA from pursuing specific actions that could potentially trigger concerns about financial stability.
Elaborating on the specifics, the document elucidates that a majority of respondents expressed their support for the Bank of England’s primary role in supervising future payments entities endowed with systemic significance. Nevertheless, some respondents sought greater clarity regarding the boundaries of the Bank’s authority.
In a previous discourse in July, Andrew Bailey, the Governor of the Bank of England, asserted that both cryptocurrencies and stablecoins fall short of fulfilling fundamental criteria for singularity and the finality of settlements, thereby making their classification as money untenable. Instead, Bailey advocated for the development of “enhanced digital money.”
