- HM Treasury today published a policy update on the country’s cryptocurrency regulation.
- The UK government outlined the FCA’s stablecoin regulatory framework in this report.
- The Bank of England (BoE) and the Payment Systems Regulator (PSR) will also play a role.
The UK government has published a policy update outlining phased regulation of fiat-backed stablecoins.
In terms of regulating stablecoin-related activity, HM Treasury will focus on two areas: use in payment chains and issuance and storage “within and outside the UK.” The latter has nothing to do with the intended use of fiat-backed stablecoins, such as payments, settlement assets, or storage of value.
Role of FCA and BoE in stablecoin regulation
In a publication released on Monday, the Treasury sets out the expected regulatory regimes from the Financial Conduct Authority (FCA), the Bank of England (BoE) and the Payments Systems Regulator (PSR).
“Depending on the regulatory environment, certain (fiat-backed) stablecoins will be introduced within the remit of the Bank of England, the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR), all of which will minimize the potential for customer harm and mitigate behavior. We will aim to do so. prudential and financial stability risks posed by stablecoins, especially when used for payments;,” reads part of the document.
The Government expects the FCA, BoE and PSR to operate within statutory objectives consistent with the overall stablecoin regulatory framework and that the regulators align towards a clear approach.
HM Treasury’s secondary bill through parliament would bring stablecoins within the FCA’s regulatory scope, but the FCA and BoE would have joint responsibility for overseeing systematically recognized companies.
“In a scenario where an FCA-approved fiat-backed stablecoin company is recognized as systemic by HM Treasury and is subject to supervision by the Bank of England, the government expects the Bank of England to act as the primary prudential regulator and be able to: . While there is oversight of such entities through Part 5 of the Banking Act 2009, firms continue to be subject to conduct regulation by the Financial Conduct Authority.” the document states.
UK legislation on cryptocurrencies is due in 2024, following the passage in June of the Financial Services and Markets Act 2023, which allows cryptocurrencies to be treated as regulated activities. The latest policy update appears to see various government agencies and regulators gearing up for this.