On 24 March 2022, the Bank of England (BoE) published a paper containing a summary of responses it received to its earlier Discussion Paper on new forms of digital money such as, systemic stablecoins and a UK Central Bank Digital Currency (CBDC).

The BoE report that the responses to the Discussion Paper found that:

  • There is a general consensus that digital money would provide benefits but that any publicly provided digital money should not replace cash.
  • New forms of digital money raise fundamental questions across a range of public policy objectives such as, direct access to central bank money for the general public; whether a CBDC should offer data protection and privacy; and what steps could be taken and by whom, to help promote interoperability between new forms of digital money and other payment systems.
  • Respondents agreed that any private sector firm issuing or intermediating payments in new forms of digital money would need to be fully compliant with the regulatory frameworks on data protection and interoperability between all forms of money.
  • An illustrative scenario was provided which modelled the impact which a potential demand for new forms of money might have on commercial banks’ ability to lend to businesses and people and respondents found that it provided a useful discussion aid and is a constructive way to understand the impact of new forms of digital money on the economy.
  • There was uncertainty around the suggestion that large and medium UK corporates could shift to non-bank financing sources. Respondents were uncertain about the funding that may be available and that market-based financing may not fully substitute for commercial banks.
  • There were four stylised regulatory models for systemic stablecoins but less than half of the respondents supported them. Some respondents did not see a need for any regulation of stablecoins, while some did not see a need for stablecoins, preferring to use cash instead. Some respondents also felt that the four models presented by the Bank may be too limiting. The BoE states that further work is needed to assess the broader implications of stablecoin regulatory models, including for the BoE’s own balance sheet and for monetary stability. The BoE also plans to continue its work on how to deal with the failure of systemic stablecoin entities. As noted in the Discussion Paper, the regulatory framework that will apply to systemic stablecoins will be the subject of a future BoE consultation, pending HM Treasury’s legislative process.