5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  But of course innovation won’t be sustained if it’s unsafe or detrimental for financial stability. Clear, transparent regulatory expectations are critical to ensure that uncertain rules of the game don’t hold innovation back. This poses several challenges for regulators – I’m going to focus on the two that are most important for financial stability. We need payments to be secure and reliable. Problem 1 for central banks is that robust and reliable ways to pay are essential to financial stability. Well-functioning and resilient payment chains allow payments to be made on time, with confidence, even in periods of economic uncertainty. Think – receipt of your salary, benefits and pensions, direct debit bill payments ability to tap and ride the tube home or leave the restaurant after a meal. The reliability and resilience of payments is so important to our economy that the UK Financial Policy Committee, tasked with identifying, monitoring and reducing systemic risks, lists avoiding serious interruptions in the provision of payment and settlement services as one of the very purposes of preserving financial stability. If a stablecoin were to significantly replace current systemic payments chains as a way to pay – logic follows that they would pose the same risks to the economy as current payments chains and should be regulated to the same standards. This is relatively straightforward: regulation should be technology neutral: based on the activity conducted and the risks posed, not the technology used or the entity’s legal form.

Indeed, in that same LINK survey, 76% of respondents said that the Coronavirus crisis will affect their future cash use. Internationally, COVID-19 has also exacerbated challenges in sending remittances.7 And many countries, advanced and developing, has necessitated sharp increases in government to person payments – raising new challenges.8  4 LINK: Coronavirus Crisis means cash use down but UK still withdrawing £ from ATMs each week:  https://www.link.co.uk/about/news/coronavirus-cash-usage-data/ 5 See LINK article above. 6 ONS: Internet Sales as a percentage of total retail sales: https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi 7 BBC News: Coronavirus: Migrants struggle to send money home: https://www.bbc.co.uk/news/business-52506797 8 World Bank blogs: Responding to crisis with digital payments for social protection: Short-term measures with long-term benefits: https://blogs.worldbank.org/voices/responding-crisis-digital-payments-social-protection-short-term-measures-long-term-benefits 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  The private sector is responding. Central banks and other regulators will need to respond too. All this – combined with regulatory changes9 has led to an explosion of innovation in payments. Given these challenges, safe forms of payments innovation are welcome. They could meet unfulfilled customer needs, widen access to financial services, lower costs, and facilitate better payments integration. Innovation could also support financial stability by increasing diversity in payment methods. And innovation could potentially address the longstanding challenges in international payments by making them less costly and cumbersome. But even though some new technology seems cutting edge, recent innovation has largely been focused on the ‘front’ or consumer-facing end, sitting on top of existing card or bank-to-bank payment systems.