A consultation on stablecoins and plans for the payments sector will be released ‘shortly’, according to the UK chancellor.
In a statement to Parliament on financial services, Rishi Sunak said this week that government would ‘publish a consultation shortly to make sure new forms of privately-issued currencies, known as stablecoins, meet the same high standards we expect of other payment methods.’
He also said that the government would ‘shortly’ publish plans for the payments sector. “We’re staying at the cutting-edge of payments technologies where we’ve just concluded the first stage of our ‘Payments Landscape Review’ and will shortly publish new plans to support the sector,” Sunak told Parliament.
The updates were part of a significantly broader speech delivered by Sunak as prelude to the second reading of the financial services bill 2019-2021. This bill was introduced in the House of Commons on 21 October and amends laws on financial services in 17 areas as the UK leaves the European Union (EU). The country’s EU exit transition period ends on 31 December.
Stablecoins and CBDCs on radar
Financial authorities worldwide have tended to adopt a cautious strategy with regards to stablecoins, which peg their value to assets such as fiat currencies or commodity prices.
Plans for a consultation were announced in March in Sunak’s debut Budget. At the time the government said that ‘the government intends to consult later in 2020 on the broader regulatory approach to crypto-assets, including new challenges from so-called stablecoins.’
Little further detail was provided this week aside from Sunak adding that both the Bank of England (BoE) and Treasury are “considering further if central banks can issue their own digital currencies, as a complement to cash”.
The BoE issued a discussion paper, ‘Central Bank Digital Currency: Opportunities, Challenges and Design’, in March and more recently has been comparing notes with other central banks on the possibilities and challenges raised by so-called central bank digital currencies (CBDCs).
The BoE last month issued a joint-report with central banks including the Bank of Canada and US Federal Reserve, as well as the European Central Bank and Basel-headquartered Bank for International Settlements (BIS) entitled ‘Central bank digital currencies: foundational principles and core features’.
BoE deputy governor Sir Jon Cunliffe described the report as “a real step forward” in “identifying the key features we believe would be needed for a workable CBDC system”. He also said: “Clearly, developments in the private sector spill across and affect our thinking. To see this as a competition between [private] ‘stablecoin’ and central banks, I think, is wrong. I can certainly envisage a world in which the two [co-]exist perfectly well.”
Payments: ‘call for evidence’ complete… now for action
In respect of payments, an HM Treasury-led review of the UK’s payments landscape was announced in June 2019, with a 41-page ‘call for evidence’ issued four months ago. The call for evidence, effectively the ‘first stage’ referred to by Sunak, closed on 20 October.
Topics addressed included real-time payments system ‘Faster Payments’; the advent of ‘Payment Initiation Services’ through open banking; and trends in cross-border payments.
Sunak also made mention in this week’s statement to refer to the ongoing independent review of the UK’s fintech sector, which got underway in July after a delay caused by the coronavirus pandemic.
The Fintech Strategic Review, which is scheduled to run for six months, was also announced in the Budget. It is being led by Ron Kalifa OBE, a former chief executive of international payment processing company Worldpay.
“Building on our existing strengths as a leading global destination to start, grow and invest in fintech and I look forward to welcoming Ron Kalifa’s report in this important area,” Sunak said this week.
More broadly in respect of fintech the chancellor said the government wants to “make sure our regulatory environment is ready to manage the far-reaching implications of technology on money itself.”