HomeLatest UpdatesFCA and BOE release discussion papers on stablecoin regulations in the UK

FCA and BOE release discussion papers on stablecoin regulations in the UK

Date: 07 November, 2023

On November 7, the United Kingdom’s Financial Conduct Authority (FCA) and the Bank of England (BOE) jointly released discussion papers outlining their regulatory plans for stablecoins in the UK.

In addition to these documents, the BOE’s Prudential Regulatory Authority (PRA) issued a letter to deposit-taking institutions’ CEOs concerning the use of deposits, e-money, and stablecoins. The BOE also released a “cross-authority roadmap” to connect these documents and elucidate the interactions between different regulatory regimes.

The UK government, on October 30, disclosed its intention to regulate fiat-backed stablecoins through specific legislation in Parliament by 2024, bringing such regulation under the FCA’s mandate.

The FCA’s detailed discussion paper aims to mitigate risks in the stablecoin market, ensuring consumer protection and market integrity. It covers retail and wholesale use cases, auditing, reporting, issuer-backed coin backing, and custodian independence. The FCA proposes adapting existing regulatory frameworks for stablecoins. The BOE suggests a regulatory framework for systemic payment systems using stablecoins and their service providers, particularly focusing on sterling-denominated stablecoins in systemic payment systems. While relying on the FCA to regulate custodians, the BOE may enforce requirements if necessary, citing Anti-Money Laundering and Know-your-customer requirements for unhosted wallets and off-chain transactions as potential issues.

The collaborative efforts of the FCA and BOE represent a forward-looking approach to stablecoin regulation in the UK. The joint publications clarify the regulatory regime for different forms of money and money-like instruments, offering certainty to businesses and consumers.

Key Points:

  • FCA and BOE release joint discussion papers on UK stablecoin regulation on November 6.
  • BOE’s PRA issues a letter to deposit-taking institutions’ CEOs about deposits, e-money, and stablecoins.
  • A “cross-authority roadmap” is released to explain interactions between different regulatory regimes.
  • UK government plans to regulate fiat-backed stablecoins with specific legislation in Parliament by 2024 under FCA’s mandate.
  • FCA’s discussion paper emphasizes risk mitigation, consumer protection, and market integrity in the stablecoin market.
  • Topics covered include retail and wholesale use cases, auditing, reporting, issuer-backed coin backing, and custodian independence.
  • BOE proposes a regulatory framework for systemic payment systems using stablecoins, focusing on sterling-denominated stablecoins.
  • BOE may enforce requirements, citing potential issues like Anti-Money Laundering and Know-your-customer for unhosted wallets.
  • Collaborative efforts of FCA and BOE reflect a forward-looking approach to stablecoin regulation in the UK.
  • Joint publications clarify regulatory regimes for various forms of money and money-like instruments, providing certainty for businesses and consumers.
References:

https://www.forbesindia.com/article/cryptocurrency/fca-and-boe-release-discussion-papers-on-stablecoin-regulations-in-the-uk/89541/1

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