Protections Needed to Stop Digital Pound Ousting Stablecoins, Lawmakers Told
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 on Wednesday to a committee of U.K. lawmakers that is set to consider new legislation for stablecoins.
Lawmakers were also warned of emerging fraud risks 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 considering the bill. He added that the CBDC “could crowd out innovation and stablecoins unless it's designed in a way that promotes competition.”
The Bill, 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 sector. That provision which would also apply to the Prudential Regulation Authority, a division of the Bank of England which ensures commercial banks remain stable.
The Bill also sets out eagerly awaited rules to ensure stablecoins – crypto assets whose value is tied to existing fiat currencies – can be used as payment, and is currently being scrutinized by lawmakers in the elected House of Commons.
Jackson worries that the U.K. is not going as far as rival jurisdictions, such as the European Union, which regulated a much broader set of private providers in its recent Markets in Crypto Assets law – and that the U.K. Bill as drafted isn’t even clear on its own scope.
“The government has said before that they will be bringing forward proposals for wider regulation of other crypto assets,” he said, but said further legal advice would be 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 sectors such as crypto custody and the issuance of new coin offerings.
Another witness, Mike Haley of Cifas – a nonprofit in which companies collaborate to fight financial crime – told the committee that anti-fraud measures included in the bill hadn’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 of those services they need to be included in the perimeter” of supervisory intervention.
“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 that allow assets to move from one blockchain to another as a potentially unregulated risk.
Committee lawmakers will proceed to a clause-by-clause reading of the bill between now and Nov. 3.