UK Consults on Stablecoin Regulatory Framework
The UK’s Financial Conduct Authority (FCA) and the Bank of England have launched a consultation process on their proposed approach to regulating stablecoins. The consultation comes as the FCA continues to warn people that cryptoassets, including stablecoins currently, remain largely unregulated and high-risk, with no protections if something goes wrong.
The two institutions say the proposed regulatory approach put forward looks to harness the potential benefits stablecoins could provide by making payments faster and cheaper. The proposals to regulate stablecoins aim to protect consumers, prevent money laundering with a robust set of rules and to safeguard financial stability.
The FCA’s Discussion Paper explores the proposed regulation around issuing and holding stablecoins that claim to maintain a stable value relative to a fiat currency by holding assets denominated in that currency. Meanwhile the Bank of England’s paper outlines how it would regulate operators of systemic payment systems using stablecoins – payments systems which, if widely used for retail payments in the UK, could otherwise pose risks to financial stability. The Bank would also regulate other entities providing services to these payment systems, such as stablecoin issuers and wallet providers, where they could otherwise pose financial stability risks.
“Stablecoins have the potential to make payments faster and cheaper for all, and that’s why we want to offer firms the ability to utilise this innovation safely and securely,” says Sheldon Mills, executive director, consumers and competition, FCA. “Getting views from others is essential for creating proportionate rules that benefit consumers and firms and also meet our objectives. We look forward to continuing our engagement with Government, our partners and the wider crypto industry as we move forward with the Government’s first phase in developing the UK’s crypto regulation regime and beyond.”
Sarah Breeden, deputy governor for financial stability, Bank of England, adds, “Stablecoins can enhance digital retail payments in the UK. With this comes the need to make sure there is robust and clear regulation in place. Our proposals aim to support safe innovation so that firms can understand the risks they need to manage and ensure that the public can be confident in all forms of digital money and payments.”