the The Bank of England confirmed at the Global Finance Summit in London that the first application of the digital pound will be wholesale, even as the US Federal Reserve plans to launch the FedNow system in July 2023.
According to Deputy Governor for Financial Stability Sir John CunliffeHThe private sector can operate the new interbank settlement system.
Wholesale digital pounds can use a new settlement system in real time
The private sector approach would use a single ledger with token reserves. An alternative approach would pair distributed ledgers with the Bank of England’s real-time gross settlement system, due for release next year.
He said that although stablecoins provide efficiency in payments, most of them remain outside the scope of the rules applicable to commercial bank funds. Therefore, he says, banks cannot currently use it to settle transfers between themselves.
Cunliffe argued that the upcoming Financial Services and Markets Act would empower the Financial Conduct Authority to ensure best practice and market integrity.
He said that stablecoins must be backed by high-quality liquid assets because it will not be possible to provide insurance for stablecoin deposits. Stablecoin transactions are likely to be limited first to “avoid disruptive change that could threaten financial stability.” added.
Earlier this year, British Economy Minister Andrew Griffiths argue The Bank of England supported the wholesale stablecoin settlement feature.
Last year, Checkout.com pioneered a stablecoin settlement feature for indigenous cryptocurrency firms. Checkout.com will take funds from payment providers Visa or MasterCard. They later transfer the funds into a stablecoin for settlement with the merchant on the cryptocurrency payment rails.
CEO Jess Houlgrave admitted that the feature was mainly enabled for B2B transactions with suppliers.
“I don’t think it will take over the push industry,” she admitted.
Crypto companies are not getting any fun while the FSM bill is in limbo
Until the Federated States of Micronesia bill becomes law, it appears that crypto companies are locked in a token war with the UK’s financial watchdog.
Only 41 out of 300 companies have met the FCA’s anti-money laundering requirements and officially secured registration. The reasons cited for rejection include insufficient liquidity and risk management.
The FCA’s Director of Payments, Matthew Long, also said the current cost of living crisis in the UK increases the risk of harm to consumers. He was critical of companies that did not engage in stress testing or scenario planning.
at FCA threatened Crypto companies with penalties and shutdowns for non-compliance.
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