PAYMENTS

The regime targets stablecoins that could be used for retail payments and wholesale settlement, while nonsystemic stablecoins used primarily for cryptoasset trading will remain under Financial Conduct Authority( FCA) supervision. The consultation paper follows feedback to the central bank’ s November 2023 discussion paper and forms part of the National Payments Vision strategy to modernise UK retail payments. The proposals address how new forms of digital money might operate alongside existing payment methods while maintaining financial stability.

Backing asset requirements adjusted Systemic stablecoin issuers will be permitted to hold up to 60 % of backing assets in short-term UK government debt, with the remaining 40 % held in unremunerated accounts at the Bank of England. This represents a shift from earlier proposals, following industry feedback on the economic viability of issuers holding large proportions of unremunerated reserves. Issuers deemed systemic at launch or transitioning from the FCA regime will initially be able to hold up to 95 % of backing assets in short-term UK government debt to support their commercial viability during growth phases.

UP TO

OF BACKING ASSETS IN SHORT-TERM UK GOVERNMENT DEBT

REMAINING

HELD IN UNREMUNERATED BANK OF ENGLAND ACCOUNTS

The central bank is also considering liquidity arrangements to support systemic stablecoin issuers during periods of market stress, providing a backstop if issuers cannot monetise backing assets through private markets.

The Bank has published a methodology for quantifying risks to credit provision from potential outflows of bank deposits into digital money. This analysis underpins the proposed holding limits and the consultation invites feedback on alternative mechanisms for managing these risks.

fintechmagazine. com 109