Stablecoins – a Problem of Liquidity, not Solvency

Bazil Sansom, a Research Fellow at Warwick Business School, has written a useful summary of the UK’s stablecoin challenge for Finextra ¹. Over the last few weeks, both the Governor and Deputy Governor of the Bank of England (the Bank) have spoken about the future of money in the UK in a number of forums. A new stablecoin consultation has also just been opened.

The Bank sees a future with a coexistence of central bank money, traditional and tokenised deposits and stablecoins (tokens designed to circulate at par with pounds, providing a new medium for everyday payments). Their future success will require trust, interoperability and consistent regulation.

Ahead of its consultation into stablecoins, the Deputy Governor has said backing asset requirements for stablecoins will be flexible, signalling holding limits, and hinting at a Bank liquidity backstop.