Bank of England Must Consider Private Stablecoins in Developing Digital Pound, Lobbyist Says

The Bank of England must take account of the crypto industry’s competitiveness when it decides how to issue a central bank digital currency, fintech lobbyist Adam Jackson said Wednesday at a meeting of a committee of U.K. lawmakers that is considering a measure to regulate stablecoins.

Lawmakers were also warned of risks of fraud from coin swaps and blockchain bridges as they deliberate on the U.K.'s Financial Services and Markets Bill.

There’s a “question whether we could apply a competition objective to the Bank of England, when we think about things like central bank digital currency and how that's implemented,” Jackson, who is the director of policy at Innovate Finance, told lawmakers on the committee. He added that the CBDC “could crowd out innovation and stablecoins unless it's designed in a way that promotes competition.”

The bill, which was introduced by the government in July, would ensure that the Financial Conduct Authority considers the country’s economic growth and international competitiveness when creating rules for the crypto sector. That provision would also apply to the Prudential Regulation Authority, a division of the Bank of England that ensures commercial banks remain stable.

The bill also sets eagerly awaited rules to ensure stablecoins – crypto assets whose value is tied to existing fiat currencies – can be used as payment and is being scrutinized by lawmakers in the House of Commons.

Jackson worries that the U.K. isn't going as far as rival jurisdictions, such as the European Union, which is regulating a much broader set of private digital-asset providers under its recently enacted Markets in Crypto Assets law, and that the U.K. bill as drafted isn’t even clear about its own scope.

“The government has said before that they will be bringing forward proposals for wider regulation of other crypto assets,” Jackson said, but said further legal advice is needed on whether the bill as it stands gives the government the authority to do so.

“If that isn't the case, are we going to have to wait another 20 years before the regulators are given the powers to regulate crypto assets?” he said, highlighting the need for rules for other areas of the crypto industry such as custody and new coin offerings.

Another witness, Mike Haley of Cifas – a nonprofit dedicated to fighting financial crime – told the committee that anti-fraud measures included in the bill haven't kept pace with the fast-moving crypto industry.

Haley asked “whether the legislation is broad enough to be able to include to ensure that the regulator can act on some types of crypto services.

“Already, we're looking at money laundering through coin swap services, which don't need an account and may not be under this regulation,” said Haley, who also cited cross-chain bridges as a potentially unregulated area. The bridges are software that allow users to transfer assets between different blockchains.

Lawmakers on the committee will proceed to a clause-by-clause reading of the bill between now and Nov. 3.

Read more: UK Crypto Industry Welcomes New Stablecoin Rules, Awaits Guidance