The Bank of England is set to enhance its systemic stablecoins framework, providing clarity on tokenized collateral and expanding the Digital Securities Sandbox by 2026. This initiative is aimed at establishing a more comprehensive digital financial market in the UK, with the potential to yield significant advantages for the economy.
In the proposed stablecoin framework, systemic issuers are anticipated to open deposit accounts with the Bank of England, which may include liquidity facilities as a safety net. The backing structure is designed with a mix of 60% short-term UK gilts and 40% deposits from the Bank. Additionally, the proposals involve consideration of temporary holding limits up to £20,000 for individuals and £10 million for businesses.
The Bank of England recognizes the substantial role stablecoins can play in revolutionizing payment methods, facilitating quicker, lower-cost transactions. Aiming for completion of this stablecoin framework by the year's end, the Bank intends to collaborate with the Financial Conduct Authority.
Regarding tokenized collateral, the Bank will offer guidance on how these assets fit within current UK EMIR regulations. There are provisions for tokenized assets that are already classified as regulatory collateral. To foster safe exploration of new market frameworks, the Digital Securities Sandbox will broaden its scope to incorporate regulated stablecoins for testing purposes in wholesale settlement.
The commitment to solid financial market infrastructures, careful risk supervision, and international cooperation is vital for fostering innovation while safeguarding the overall stability of the financial system. Stakeholders are urged to engage actively in this evolving landscape to maximize opportunities and navigate potential challenges.