The Bank of England will take over collapsed “stablecoin” companies to prevent a cryptocurrency crash hitting financial stability, under Treasury plans.
How do you take over something decentralised?
Stablecoin issuers would be placed into special administration by the Bank to protect consumers if they fail, a Government consultation said on Tuesday.
The proposals would mean companies offering stablecoins, cryptocurrencies designed to hold their value, would fall under similar rules as banks and other systemic institutions.
The Treasury plans to recognise stablecoins as a legal form of payment under efforts to make Britain a “crypto hub”.
Presumably that means oversight – at least – of what they’re invested in. Which will be interesting…..
Don’t understand why. If a cryto crashes people have lost money but there is no institutional knock on effect as when a bank goes under Shirley ?
So is this the state being worried about insurgent financial instruments?
Are they implying that the GBP is crash-proof?
I’d just leave ’em to go to hell. Can’t see any reason why the government should back other people’s counterfeit currency with their own version.
Not at all. But a lot of the “Oh my God, we’re going to have a sterling crisis” is from people who have forgotten that we’ve a floating exchange rate now. We’ve not got a peg that we’re trying to defend. Unlike the times when all the economics books that people are dimly recalling were written. It’s a fun example of how ideas of long dead economists etc…..
I suspect this part
is the key. And to have oversight will mean regulation.
stablecoins, cryptocurrencies designed to hold their value,
Not very well designed, it seems.
So why spend money to preserve a crappy design?
Has the government run out of more conventional ways to squander money?
How on earth can some bullshit digital ponzi scheme be regarded as a “systemic institution”? You might as well declare financial support for everyone who blows their rent money on the slots.
Stablecoins are supposed to have an equal value of a real currency for every unit of linked crypto that they sell. The fact that no-one checks this leads to events like the massive Tether fraud.
My philosophy is a fool and his money is soon parted and speculating in crypto is particularly foolish. I don’t think the BoE needs to stick it’s oar in.
I don’t really get stablecoins. To me it sounds like they’re just a parallel transfer & accounting system for government fiat money. They’re not a currency in any meaningful sense of the word.
@BiS
That’s the point of them. They offer ease of conversion from and into crypto, but marketed as secure by virtue of the assets of real currency they hold.
” speculating in crypto is particularly foolish”
Speculating in crypto is inherently foolish. The only purpose of any currency is that users will be confident they can exchange it for goods & services. It has to be a stand-alone token of value. “Investing” in it as opposed exchanging it for goods & services -which has happened to most Bitcoin – degrades that confidence. As far as the majority of people engaged in commerce are concerned the confidence in & thus the value of Bitcoin approximates zero.
If the stupid didn’t “invest” in Bitcoin the value of Bitcoin in commerce would rise.
Just look at the people who are actually using BC in commerce. There’s a few people who do deals in it as an alternative to government money because they think it’s “edgy” & image building. There’s some who the banking system won’t do transfers to because what they offer doesn’t meet woke approval. There’s a web discussion forum I pay membership subs to in BC because Visa/Mastercard don’t like the content. There’s a certain amount of “black” commerce gets done in it. Drugs. Weapons. For them, high risk but lower risk than transfers through the legit transfer system or hauling cash/items of value internationally.
You accept BC for a high value transaction & try & convert that to government money you’d have the bank compliance people all over you like a bad smell. If you couldn’t show a previous contra-entry of buying BC as an “investment” so you’re cashing in your profit, you’d never get your money or get investigated the hell out of.
Why would anyone want to be involved in it?
This is about regulation of existing banks who issue stable coins. Think HSBCGBP.
Obviously the entire point of decentralisation is that it is regulated by the market not HMG.
The best example of a decentralized stablecoin is DAI.