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To find out more about how we deal with your personal data, your rights or to get in touch please visit Privacy and the Bank of England. Should you have any additional requirements, please contact us through one of the above channels and we can provide this in accessible formats. Exchanges may also provide a wider range of services beyond wallet services.
Unfortunately for the teams at Facebook, trust and privacy aren’t synonymous with the company’s past. In an attempt to bring trust to the Libra project, Facebook launched a not-for-profit organisation called the Libra Association, which was put in place to manage the day-to-day build and operations of the stablecoin project. Facebook invited a slew of trusted, globally-renowned brands to help launch the association, which included the likes of PayPal, eBay, Mastercard, Stripe, Visa, and Mercado Pago. However, this was not enough to stave off the fears of regulators, which included concerns around monopolisation considering Facebook is used by half of the world’s internet users. It’s not just easy to register with Western Union, it’s free and easy – with a range of helpful features and convenient money transfer options.
This, in turn, could make unhosted wallets attractive tools for potential money laundering and terrorist financing purposes. In addition, the Bank considers that systemic stablecoin issuers would need to mitigate the risk that a shortfall in backing assets could result in a loss of confidence in the stablecoin. The Bank proposes to require that issuers clearly identify risks that can lead to a shortfall in the backing assets, including any operational risks such as fraud or mismanagement, and the costs of distributing assets to coinholders. Issuers would earn interest on USDT need to hold a reserve of assets to mitigate these shortfall risks. These assets would need to be held by issuers on statutory trust for the benefit of coinholders (in a similar legal structure to that proposed for the backing assets).
Ultimately, Tether represents both the incredible potential and lingering risks of the DeFi ecosystem. Its future remains uncertain, but its integral utility for the present is unquestioned. Without stablecoins like Tether, these transactional use cases would be severely limited. Tether, in particular, has become the most widely used stablecoin in crypto, with a market cap of over $96 billion as of early 2024. Stablecoins have seen growing attention in cross-border payments and beyond.
The Bank proposes to apply its existing approach to the supervision of financial market infrastructure firms, including systemic payment systems, to issuers of stablecoins used in systemic payment systems. To mitigate these risks, the Bank proposes that there should be a safeguarding regime to protect coinholders’ legal claims and to ensure that coinholders can redeem their stablecoins at par value at all times. This is critical for meeting the FPC’s second expectation that systemic payment stablecoins should meet equivalent standards to commercial bank money. This could include ensuring, subject to confidentiality constraints, access to sufficient customer information (including their balances held) to ensure repayment.
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