Bank of England CRUSHES stablecoins with TOUGH proposed regulations!
Stablecoins will need a new fee-based business model
These regs are so long that for ease of consumption I am providing links only:
BOE website: here
BOE PDF DOWNLOAD: here
FCA PDF: here
BOE ROADMAP FOR REGULATORY AUTHORITY OVER SCs, website : here
The BoE and Financial Conduct Authority(FCA) discussion paper on stablecoin so SEVERE and makes it clear banks should stay away!
👉TAKEAWAYS:
🔹 Stablecoin issuers will be non-banks!
🔹 “Same risk, same regulatory outcome” guidance to ensure the singleness of money.
🔹 The regs are for sterling-based stablecoins only
🔹 Payment system/transfer function operator is on the regulatory hook.
🔹 🔥 Stablecoins must be 100% backed by deposits at the BoE with NO INTEREST paid 🔥
🔹 Wallet providers must ensure user's ability to redeem coins at par and legal right to coin access.
🔹 Unhosted (non-custodial) wallets are subject to FATF “travel rule” (This renders them impractical for use.)
🔹 Legal entity or natural person must be held accountable on decentralized permissionless systems!
🔹 Stablecoin holders will not benefit from deposit protection or a resolution regime.
🔹 🔥 Issuers must not involve the payment system or the coins taking credit, liquidity, or market risk and which generate revenues from payment services rather than liquidity and maturity transformation. 🔥
🔹 Banks should ensure that they only provide innovations in digital money to retail customers in the form of deposits.
🔹 If a bank wants to issue e-money or stablecoins to retail customers, this should be done from a separate non-bank insolvency-remote entity.
👊STRAIGHT TALK👊
The BoE and FCA crush stablecoins with regs so severe that they will change their business model!
First, the proposed regulations force issuers to park their cash balances at the BoE with no interest paid on the deposits!
Compare this with Tether and Circle, who can make nearly 5% on USD assets doing absolutely nothing, and the “death sentence” becomes clear.
Then, BoE makes it clear that issuers can take no financial risk but only revenue from payment services!
The stablecoin model will be fundamentally changed from profits on cash management to fee only!
This means that the stablecoin model is fundamentally changed from one where the issuer makes money on cash management to one with fees only!
The BoE tells banks NO to stablecoin issuance but that they are OK with deposit tokens.
I like stablecoins and look forward to using them in the future, but the game just changed for issuers.
Do you think that the US Fed and Treasury will take notice?
Thoughts?
Read this next….
Why is the BoE so strict? Behind it is the fact that stablecoins are far less stable than advertised. Read this report to see just how bad it is!
