In response to the Bank of England’s consultation paper on the introduction of a Central Bank Digital Currency (CBDC), also known as a “digital pound,” Circle has voiced its perspective on the matter. Circle emphasizes that well-regulated, privately-issued payment stablecoins are already fulfilling the demand for digital forms of money in the modern era.
As the Bank of England explores the potential for a retail CBDC that directly engages with end users, Circle highlights the existing digital currency innovations such as USDC and EUROC, which effectively serve various purposes like traditional merchant payments and peer-to-peer transactions. Circle encourages the Bank of England to collaborate with governmental bodies like HM Treasury and financial regulators like the Financial Conduct Authority to establish a comprehensive regulatory framework for payment stablecoins, particularly after the Financial Services and Markets Bill recognized a standard for payment stablecoins in UK law.
Circle seeks further clarity from the Bank of England regarding the practical implementation of the proposed “public-private partnership” model for digital wallet technologies in the context of a potential digital pound. Additionally, Circle emphasizes the importance of considering other forms of money, including commercial bank deposits and payment stablecoins, within any digital wallet solution for a retail CBDC.
While the Bank of England has suggested initial limits on the number of digital pounds that individuals or entities can hold in a digital wallet, Circle raises concerns about the potential limitations’ impact on the utility of digital currencies as a store of value and means of exchange. Circle also warns that the Bank’s proposals for the use of a digital pound could disrupt the flow of traditional commercial bank deposits, which play a crucial role in credit creation for financial institutions.
Instead of imposing limits, Circle urges the Bank of England to explore how payment stablecoins can be seamlessly integrated into the UK regulatory system and commercial market. Payment stablecoins offer secure and efficient payment options without requiring significant government investment in new financial infrastructure, preserving the essential separation between the central bank and financial services provider in the UK economy.
As the Bank of England navigates the path toward a digital pound, Circle’s input underscores the potential of payment stablecoins to facilitate innovative, cost-effective, and streamlined consumer and merchant payments within the UK’s financial landscape.
