On January 14, 2026, Bank of England Deputy Governor Dave Ramsden proposed designing protective arrangements similar to bank deposit insurance for systemically important cryptocurrency payment tools. This directional statement quickly attracted joint attention from traditional finance and the cryptocurrency industry. Ramsden's remarks currently remain at the policy conceptual level, with specific institutional forms and legal texts awaiting further verification and confirmation in subsequent official documents. Almost simultaneously, the UK raised the protection limit for cash deposits from £85,000 to £120,000. This figure has naturally been used by the market as a quantitative reference for measuring future protection strength, but regulators have yet to establish it as an official standard applicable to new payment tools. The core contradiction that emerges is that on one end, there is a banking system with mature deposit insurance and clearing arrangements, while on the other end, there are new payment tools that have systemic importance but still exist in a regulatory vacuum and transitional phase of institutional integration. Both coexist in the same financial system, forcing regulators to find a difficult middle ground between ensuring financial stability and embracing innovation.

From £85,000 to £120,000 Protection Limit

The UK's cash deposit protection limit has been raised from £85,000 to £120,000, reflecting a systematic reassessment by regulators of the deposit safety threshold in light of inflation, interest rate fluctuations, and changes in the risk tolerance of small and medium savers. This figure is not specifically tailored for new payment tools but has naturally become a quantitative anchor for measuring future holder protection strength: when discussing any "deposit insurance-like" scheme, policymakers and market participants find it difficult to bypass this amount range that has already been written into public expectations. For this reason, £120,000 currently serves more as a discussion benchmark rather than a protection standard locked in by regulators. The regulatory side has not committed to simply transferring the cash deposit limit to the realm of new payment tools, nor has it publicly matched the two on a one-to-one basis. Any interpretation that views this figure as a predetermined insurance amount would overestimate the maturity of policy advancement.

If there is indeed an attempt in the future to transfer the current deposit protection level to systemic new payment tools, issuers will face a whole new set of cost and constraint restructuring. On one hand, the addition of a protection layer will increase compliance costs and operational expenses, forcing the issuance mechanism to align more closely with traditional banks in terms of reserve management, asset duration, and liquidity arrangements. On the other hand, a high protection limit will compel product structures to tilt towards more conservative and transparent asset allocations, thereby weakening the space for high-yield investment strategies and altering the current business model characterized by efficiency and flexibility. For some institutions that operate with a light asset model, this means either accepting stricter capital and risk management constraints or proactively avoiding the "systemic importance" regulatory label before their scale has expanded.

Priority Repayment and Deposit Insurance: Who Covers Systemic Risks?

In possible regulatory designs, granting holders of new payment tools priority repayment rights in statutory liquidation procedures is being discussed as a key line of defense. This idea means that once an issuer or related payment institution enters bankruptcy or compulsory liquidation, holders will be significantly higher in the repayment order than ordinary unsecured creditors, and in some cases, close to the safety level of cash deposits. However, this idea currently remains in the realm of policy discussion and consultation documents and has not yet been written into legally binding statutes. Whether holders can truly enjoy this "quasi-deposit level" right still awaits subsequent legislation and regulatory details to be implemented.

In contrast to this idea is the traditional bank deposit insurance system, whose boundaries of responsibility, sources of funds, and conditions for triggering compensation have become relatively clear after years of practice: insurance funds are typically accumulated from contributions by the banking industry, covering regulated deposit products, and triggering conditions are often linked to statutory events such as bank bankruptcy or regulatory takeover. If a similar mechanism is to be established for new payment tools in the future, the first question to answer is who will pay, what risks will be covered, and at what point compensation will be triggered. Whether to completely replicate the existing deposit insurance model or to design a lightweight protection layer that only activates in extreme circumstances will directly affect the distribution of industry costs and product pricing logic. When holders are elevated in the repayment order, other creditors originally positioned upstream will be passively pushed back, which not only reshapes the distribution of default risk among different creditors but also forces financial institutions to reassess the status of new payment tools in overall asset-liability management. Once such assets are viewed as "regulatory priority protection objects," banks, funds, and other institutions will experience substantial changes in their trade-offs between yield compensation and risk tolerance when allocating related assets.

British-style Gradual Reform: From Consultation to Consultation Documents

The approach of UK regulators continues the consistent path of gradualism. According to public information, the Bank of England issued a consultation document on the use of new cryptocurrency payment tools in systemic payment systems as early as February 2024, providing a clear historical starting point for the current institutional discussion. It is important to emphasize that the specific content and scope of the consultation are currently mainly based on single-source reports and still need to be cross-verified with subsequent official releases. However, it can be confirmed that regulators had already viewed these tools as part of the payment infrastructure two years ago, rather than as marginal experiments.

Along this timeline, another point of interest for the market is the planned release of a regulatory consultation document on the importance of new payment tools priced in pounds in November 2025. According to existing information, this timeline also comes from a single source and has not yet been fully verified through multiple documents, but the signals it sends are quite clear: the UK has chosen to systematically outline regulatory expectations for this emerging field through formal consultation documents, rather than passively responding through scattered statements and case handling. More critically, the new mechanism is likely to incorporate existing financial compensation schemes (such as the FSCS) into its operational framework, embedding new payment tools within the existing compensation and operational systems rather than building a completely independent insurance structure from scratch. This approach not only reduces the execution difficulty of institutional innovation but also fully reflects the UK's regulatory style of "incremental integration" when balancing innovation and stability: first integrating new species into the old system, and then continuously calibrating risk boundaries through gradual adjustments.

Answers Not Yet Given by MiCA

In contrast to the path being brewed in the UK, the EU's MiCA framework has not yet explicitly introduced similar priority repayment arrangements for holder protection, exposing a gap in institutional design against the backdrop of new payment tools gradually gaining systemic influence. MiCA focuses more on building rules around issuance licenses, reserve asset requirements, and information disclosure, while being relatively restrained on the question of "who gets protected first when something goes wrong," leading to a lack of unified expectations in the market regarding the situation of holders in the event of extreme risk events.

The UK, on the other hand, attempts to construct a thicker layer of protection for systemically important cryptocurrency payment tools through a dual design of priority repayment rights and deposit insurance-like arrangements. The difference in this path reflects regulators' different considerations of their domestic financial system structure and international financial center status: London hopes to maintain its attractiveness to new payment tool businesses without sacrificing financial stability, so taking "one more step" on the safety threshold becomes a strategic choice in the competition for compliance and innovation resources. If the UK significantly outpaces the EU in terms of protection levels and institutional completeness, issuers will inevitably consider regulatory certainty, protection strength, and compliance costs when choosing their jurisdiction for implementation. Stronger holder protection may raise entry barriers but is also expected to attract issuers and large payment players seeking long-term compliance paths and valuing institutional endorsement, thereby creating a demonstration and siphoning effect in cross-border business layouts.

The Battle for Financial Stability: Who Dares to Insure Stablecoins First

In this round of discussions, Dave Ramsden's core statement is, "When these types of cryptocurrency payment tools develop to have systemic importance, we need to ensure they do not become a weak link in financial stability." This statement clearly frames the regulatory goal as preventing risk spillover rather than simply suppressing innovation through administrative means. In other words, the Bank of England is more concerned about what chain reactions these tools will have on the banking system, money markets, and even the macroeconomy once they are embedded in the payment system or asset allocation, and the design of insurance mechanisms and priority repayment rights is intended to set up "firewalls" in advance along the risk transmission path.

From now until the release of the consultation draft and the formation of specific rules, the UK regulatory authorities still need to continuously negotiate and communicate with the market on three key variables: first, where exactly the protection strength is set, drawing a reasonable boundary between "symbolic protection" and "comprehensive coverage"; second, who bears the source of funds, whether it is entirely accumulated from industry contributions or involves a multi-tiered risk-sharing structure; third, how the design of priority repayment balances the safety of holders with the legitimate rights and interests of other creditors, avoiding new imbalances arising from a single institutional migration. For the cryptocurrency industry, once deposit insurance-like arrangements and priority repayment rights are truly implemented, the regulatory threshold for systemic new payment tools will be significantly raised, and the space for light regulatory arbitrage and "shadow banking-style" operations will quickly shrink. However, at the same time, compliant assets that receive such institutional endorsement will, for the first time, approach the safety perception of traditional deposits and high-grade money market instruments, opening up previously inaccessible spaces in institutional allocation, payment scenario integration, and cross-border compliance operations. Those who can adapt to the higher regulatory heights first are more likely to occupy a commanding position in the next round of global payment system restructuring.

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