In summary, the UK government proposes a regulatory framework for stablecoins, specifically focusing on fiat-backed stablecoins, to ensure consumer protection, mitigate risks, and maintain financial stability. The regulatory landscape involves coordination among the Bank of England, the Payment Systems Regulator (PSR), the BOE, and the FCA. Here are the key points:
1. Regulatory Oversight:
minimise The Bank of England, FCA, and PSR will regulate fiat-backed stablecoins to minimize customer harm and address conduct, prudential, and financial stability risks. – Regulators will work together to create a coherent framework, avoiding regulatory overlaps.
2. FCA’s Regime:
HM Treasury aims to regulate fiat-backed stablecoins in two ways: regulating their use in payment chains and regulating activities related to issuance and custody, irrespective of their purpose (e.g., payments, store of value, or settlement asset).
Legislation will define fiat-backed stablecoins as those maintaining a stable value by referencing and holding a fiat currency as backing.
3. Regulation through Legislation:
The usage of fiat-backed stablecoins in payment chains will be governed by changes to the Payment Services Regulations 2017 (PSRs 2017).
The Order of 2001 (RAO) for Regulated Activities, according to the 2000 Financial Services and Markets Act, will cover the activities of issuance and custody of UK-issued fiat-backed stablecoins.
4. Authorization and Standards:
– Firms conducting issuance or custody activities must adhere to FCA rules and guidance.
– Overseas stablecoins used in UK payments may be accommodated, with the possibility of FCA authorization for the payment arranger ensuring compliance with UK standards.
5. Scope and Exclusions:
The regulatory regime will not cover stablecoins used in buying and selling cryptoassets on exchanges until the wider regime for cryptoassets is implemented in phase 2.
Other stablecoins (non-fiat-backed) and unbacked cryptoassets used in payment chains will remain unregulated.
6. Future Regulation (Phase 2):
The proposed regime will remain in place when the wider regime for cryptoasset regulation is introduced in phase 2.
The custody activity in the RAO will expand to cover a broader category of crypto-assets, and new regulated activities, such as operating a crypto-asset trading venue, will be introduced.
7. Bank of England’s Role:
The authority will rest with the Bank of England to regulate systemic Distributed Ledger Technology (DLT) payment systems and service providers, including those using stablecoins.
The PSR will have similar powers for DLT payment systems, contingent on HM Treasury recognition or designation.
In conclusion, the proposed regulatory framework seeks to address the specific risks associated with stable coins, provide clarity for consumers, and pave the way for a thorough regulatory framework for crypto-assets in the future.