Andrew Bailey looks at recent innovations in payments and the challenges they bring. He examines the benefits and risks that so-called ‘stablecoins’ present and explores the implications of the Financial Policy Committee’s recent expectations for payments and stablecoin regulation. He says while elements of the technology are novel, many of the challenges are not new in the history of money.
Digital currencies are not just a new type of money. They also bring their own payment infrastructure. So when considering how we regulate them we must look at both the ‘money’ and the ‘payment’ aspects, both domestically and globally.
One alternative to a private stablecoin is a central bank digital currency. While they have great potential, we need to work out what they mean for the shape of the financial system and the role of the central bank.