Key takeaways:
- The Bank of England, the central bank of the UK, has unveiled a strategy to regulate the stablecoin cryptocurrency market.
- The UK government has proposed laws starting in early 2024 for fiat-backed stablecoins.
The Bank of England, the central bank of the United Kingdom, has unveiled a strategy to regulate the stablecoin cryptocurrency market.
The Financial Conduct Authority (FCA) and the Bank of England (BOE) intend to supervise the digital asset market in accordance with the guidelines that the UK government published last week.
The UK government has proposed laws starting in early 2024 for fiat-backed stablecoins. The report states that the FCA will oversee the broader cryptocurrency market, while the BOE will oversee systemic stablecoins.
It was revealed by UK Prime Minister Rishi Sunak that the country aspires to become a center for cryptocurrency. The UK’s objectives include establishing clear regulations for digital assets and cryptocurrency companies.
With its most recent plan, the UK follows the lead set by Japan and the European Union.
According to a press release from the bank, the BOE’s plans center on stablecoins linked to the value of the British pound since the central bank believes that they will likely be used extensively for payments.
The central bank is thinking of limiting the amount of stablecoins that each individual can own, among other things. The report states that the British pound-backed stablecoins will be the BOE’s primary emphasis. According to a letter from the PRA, the Prudential Regulations Authority:
“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.”
The letter made clear that the protections afforded to stablecoin users are different from those afforded to ordinary deposit takers and that the PRA wants lenders in the nation to reduce risks “of contagion.”
Furthermore, the FCA has affirmed that stablecoin issuers must obtain prior authorization in order to circulate stablecoins within or outside of the nation.
Moreover, the document mentioned that issuers might retain interest income and returns from the “backing assets.” The monitoring agency added:
“We are conscious that this may be perceived as unfair to consumers, in the event that interest rates continue to remain high and/or go up significantly (given that the regulated stablecoin backing assets are expected to be protected as client assets),”
The UK has just released a comprehensive set of regulations pertaining to the stablecoin and crypto markets. The US has fallen behind in this regard, though.
