Bank of England Unveils Regulatory Framework for Stablecoins
The Bank of England (BOE) and the Financial Conduct Authority (FCA) have revealed a comprehensive plan to regulate the stablecoin cryptocurrency market in the United Kingdom (UK).
This initiative aligns with the UK government’s recent proposal to establish regulations for fiat-backed stablecoins starting in early 2024.
The BOE will oversee systemic stablecoins while the FCA will govern the broader cryptocurrency market.
The move is part of the UK’s broader vision, articulated by Prime Minister Rishi Sunak, to position the nation as a crypto hub by implementing clear rules for digital assets and crypto firms. This development follows similar actions taken by the European Union and Japan to regulate the crypto space.
Specifically, the BOE will focus on stablecoins backed by the British pound, as per the Prudential Regulations Authority’s assessment that “contagion risks will be lower for stablecoins used in systemic payment systems regulated by the Bank than for e-money or other regulated stablecoins captured by the FCA’s regime.”
Additionally, stablecoin issuers must obtain prior permission before issuing these assets in or from the UK. The paper also allows issuers to retain revenue generated from interest and returns on the backing assets.
While this regulatory framework represents a significant step forward for the UK in providing clarity to the crypto and stablecoin industry, it highlights the lag in the United States, which has yet to introduce such comprehensive guidelines.
