Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will make an assessment of the potential effect on monetary sovereignty of the widespread use of (a) privately-issued and (b) foreign state-issued stablecoins.

Certain privately-issued stablecoins could be used as widespread means of payment, including by retail customers, driving consumer choice and efficiencies. At the same time, as noted by the G7 Working Group on Stablecoins in 2019, without appropriate safeguards, stablecoins could also have implications for the international monetary system, including currency substitution, and could therefore pose challenges to monetary sovereignty. The government is committed to continued international coordination and cooperation to ensure that innovation in private digital money and payments is responsible, safe and consistent with G7 shared policy objectives.

In the UK, legislation to bring stablecoins, where used as a means of payment, within the regulatory perimeter is expected to be part of the forthcoming Financial Services and Markets Bill announced in the Queen’s Speech on 10 May. The Bill will be introduced later in the session when parliamentary time allows.

On 14 October 2021, the G7 under the UK Presidency published a set of Public Policy Principles for retail central bank digital currencies (CBDCs), covering factors such as financial stability, privacy, and inclusion. Principle 7 sets out that CBDCs should be designed to avoid risks of harm to the international monetary and financial system, including the monetary sovereignty and financial stability of other countries. These factors should all be considered by countries when designing and potentially delivering a CBDC.

The government is confident in its continued ability to maintain the stability and the integrity of the UK’s monetary system.