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Regulation

Bank of England governor dismissed Bitcoin as a means of payment

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During a virtual conference hosted by the Brookings Institute, Andrew Bailey, Bank of England’s (BoE) governor, stressed that crypto assets are just “unsuited to the world of payments.” 

In prepared remarks on the future of cryptocurrencies and stablecoins, Bailey qualified Bitcoin (BTC) as an asset that has “no connection at all to money.” 

Also, he showed reluctant himself to believe crypto assets are a proper investment opportunity, because “their value can fluctuate quite, widely, unsurprisingly.”

Bailey provided such comments while talking about the picking up in the pace of innovation in payments. However, on the stablecoins, the governor commented that it could offer some “useful benefits,” such as reducing frictions in payments, but he warned:

“If stablecoins are to be widely used as a means of payment, they must have equivalent standards to those that are in place today for other forms of payment types and the forms of money transferred through them.”

The speech also highlighted that some stablecoins proposals don’t include a legal claim for crypto holders, as the governor believes stablecoins “need to offer coin-holders a robust claim, with supporting mechanisms and protections to ensure they can be redeemed at any time 1-to-1 into fiat currency.” 

The governor added that the starting point for the discussion of a global stablecoin should be based on single currencies but he didn’t necessarily rule out that the idea of a multi-currency stablecoin. Bailey said:

“A global stablecoin is a cross-border phenomenon. It can be operated in one jurisdiction, denominated in another’s currency, and used by consumers in a third. The regulatory response must match this. […] Global issues require a global response, particularly for multi-currency stablecoins intended for cross-border transactions.”

In June, United Kingdom-based blockchain firm L3COS submitted a proposal to the Bank of England, or BoE, for a blockchain-based operating system to power a central bank-issued digital currency, or CBDC.

Also, in March, the BoE published an in-depth discussion paper devoted to CBDCs, which analyzed the rapidly changing payments landscape and the potential role for CBDCs to support the bank’s task of managing monetary and financial stability.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.