Stablecoins and central bank digital currencies (CBDCs) don’t pose an inherent risk to financial stability even if they displace bank deposits, a Bank of England (BoE) executive director said.
- A shift to wider use of stablecoins and CBDCs “does not inherently constitute a financial stability risk as long as it happens in an orderly manner,” Christina Segal-Knowles, executive director of financial market infrastructure at the BoE, said in a speech Thursday.
- Segal-Knowles played down concerns that holding stablecoins and CBDCs would undermine the traditional banking model if consumers chose to use them rather than depositing their money into a commercial bank.
- “In fact, findings show that the implications of this in the long term for the ability of households and businesses to get a loan are relatively modest,” she said, although she acknowledged there is some uncertainty about that.
- Stablecoins don’t pose any new issues, Segal-Knowles said. They are similar in nature to traditional forms of private money that is deposited by consumers and businesses in commercial banks.
- “This means that we will hold them to standards similar to those applicable to existing private money. It doesn’t matter what type of technology you’re using or the legal form of the firm.”
- The speech followed the release of a BoE discussion paper exploring stablecoins, which focused on the adoption of private money and difficulties that could be presented for monetary policy as well as the cost and availability of lending.
Source: Coindesk
