Bank of England, FCA seek feedback on proposals for stablecoin regulation

According to a Bank of England statement released on Monday, the proposed proposals could apply to all potential payment systems that would use the stablecoin in the UK at a system level.

The Central Bank noted that the need for government regulation of stablecoins is associated with a potential risk to the economic stability of the country. “Stablecoin payment systems, which are widely used for retail payments in the UK, could threaten financial stability,” the Bank of England added.

Several Discussion Papers Regarding Stablecoins Released

The proposed regulation is presented in two discussion papers, one prepared by the Bank of England and the other by the Financial Conduct Authority.

The Bank of England describes the regulator's intentions to impose controls on system payment system operators that use stablecoins, as well as stablecoin issuers and wallet holders. “These proposals aim to promote secure innovation, so that companies understand the risks they need to manage, and so that the public can have confidence in all types of digital money and payments available,” said Sarah Breeden, Deputy Governor of the Bank of England. financial stability issues.

Each of the discussion papers aims to assess the potential benefits that stablecoins could provide to consumers and retailers in the UK, particularly by making payments faster and cheaper. The FCA document analyzes the recommended position regarding the issuance and storage of stablecoins. “Stablecoins have the potential to make payments faster and cheaper for everyone, which is why we want to offer companies the risk-free way to use this innovation,” said FCA chief executive of consumer and competition Sheldon Mills.

Mills stressed that UK government regulators are seeking feedback so they can develop effective tools “that benefit consumers and businesses and meet our requirements.”

On Monday, the FCA, BoE and PRA also prepared a cross-departmental framework that sets out how existing and recommended UK regulations will interact for holders of different formats of digital money or money-like financial instruments.

Legislative regulation of stablecoins is the initial stage of introducing a comprehensive mechanism for regulating crypto assets in the UK. The UK Treasury published final proposals for crypto asset regulation on October 30, which gave the FCA powers to oversee the issuance and custody of fiat-backed stablecoins in the UK.

"We support the discussion paper jointly published today by the FCA and the Bank of England, which explores how the UK plans to regulate stablecoins in the future. CryptoUK will convene a working group that will provide a unified response from the industry and will engage mutually with key stakeholders to provide the sector's views on these important issues," a CryptoUK spokesperson said.

The Bank of England and the FCA are seeking feedback from the public and industry by 6 February 2024.