As in G7 Working Group on Stablecoins, October 2019, ‘Investigating the impact of global stablecoins’. https://www.bis.org/cpmi/publ/d187.pdf 7 The PRA may require subsidiarisation where firms have material retail banking operations. In making that judgement, the PRA takes account of the value and type of retail deposits and the extent to which they are covered by the FSCS. We expect branches to have under £ of retail deposits, and also take account of the number of depositors and the number of retail and small-company customers with transactional accounts. See: SS1/18, ‘International banks: the Prudential Regulation Authority’s approach to branch authorisation and supervision’.https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisorystatement/2018/ss118 6  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  banking and traditional payment systems, the regulatory response must be grounded in internationallyagreed standards. Global issues require a global response, particularly for multi-currency stablecoins intended for cross-border transactions. Along with the G7, the Financial Stability Board has been leading co-ordination of the international response to global stablecoins. The FSB consulted in April on the regulatory and supervisory challenges they present, with a final report due in October, and the Bank of England supports the efforts to set a baseline set of expectations. These include that stablecoins should be regulated based on the functions they perform and risks they create, and that there should be comprehensive domestic and international regulation and supervision. Global stablecoins should have robust governance and risk management, and be transparent about their stability mechanisms and coin-holders’ rights.

The starting point for a global stablecoin should be based on single currencies. We should not run before we can walk. Setting standards early on  We must therefore set standards early on so that innovation can take place with confidence on what will be required. This gives certainty not only to regulators and users but also to innovators. Indeed, the international community has agreed that “no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks… are adequately addressed, through appropriate designs and by adhering to regulation that is clear and proportionate to the risks.”6  However given the novel form, existing standards do not necessarily easily apply. There need to be minimum international standards for stablecoins. In addition any stablecoin with potential for wide scale use in the UK must meet our domestic expectations. A stablecoin which intends to launch with sterling-based activities in the UK should first meet relevant standards and be appropriately regulated. And if a sterling retail stablecoin wishes to operate at scale in the UK, then we will strongly consider the need for an entity to be incorporated in the UK. This is similar to the subsidiarisation of banks that we require if they are holding UK retail transactional customer deposits above a de minimis level.7  But 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.