FCA Launches Sterling Stablecoin Sandbox, Says UK is “Open for Business”

The Financial Conduct Authority has launched a sterling stablecoin sandbox and declared the UK open for business for crypto a year after outlining its initial plans for the sector and after facing heavy criticism for being slow to embrace digital assets.

David Geale, executive director, payments and digital finance and payment systems regulator (PSR) managing director, said in a speech that it launched a stablecoin specific cohort in its Regulatory Sandbox, which will aim to provide support to companies testing the issuance of stablecoins in the UK. The sandbox will also serve as a testing ground for policy proposals and regulatory initiatives

“This truly is a very exciting and groundbreaking initiative,” Geale said, while encouraging industry participants to apply to take part in the sandbox. Applications will close on 18 January.

To show its “commitment to helping firms test, grow and thrive in the UK,” the FCA had already accepted a company that’s gearing up for testing in the coming months. “We will support them as they test their GBP stablecoin for payments in another world first,” Geale said.

The speech pushed back against criticism that the regulator has been too slow in its policymaking, with Geale noting that while the FCA supports innovation rather than stifling it, it has to make sure that the integrity of the market is maintained. “This market is unlike any other, and we don’t have all the answers yet,” he said, adding that the regulator needs to consider new rules and frameworks for the risks that come with this new market. Geale also noted that copy and pasting existing rules wouldn’t work, even if the goal is to stick to the internationally agreed “same risk, same regulation” principle.

As an example of a new challenge, Geale cited disclosure and due diligence requirements that are difficult to apply to decentralised cryptoassets, adding that there is also higher legal uncertainty over crypto ownership and location than in traditional finance. Equally, as the majority of people access digital assets via exchanges, the stability of these firms is crucial to avoiding harm to consumers, he observed, saying that as a result, the FCA is extending its operational resilience framework to cover cryptoasset firms, similar to banks.  “This will ensure they meet consistent operational resilience standards – which is crucial, given the market’s reliance on technology,” Geale stated.

Geale also acknowledged, however, that crypto’s popularity is ongoing, with over 90% of people in the UK having heard about crypto, and roughly seven million currently owning or have owned digital assets.

The regulator will finalise its rules for crypto assets next year, which Geale said would be “strong and clear – and serve as the foundation of our regime.” He added that the FCA aspires for a “clean” market that drives global standards, before stressing that for firms that want to operate in such markets, the UK is open for business.