UK’s Stablecoin Regulatory Regime Proposal Goes Live

The UK has proposed a range of regulatory requirements pertaining to stablecoins issuance, use, and storage.

Handsome man blowing a Union Jack flag infront of the London skyline.
Created by Gabor Kovacs from DailyCoin
  • The UK is fast-tracking its plan to implement a stablecoins regulatory regime.
  • The government published a discussion paper with new proposals.
  • The proposed framework focuses on three key areas.  

The United Kingdom (UK) has shared its plan to enact a regulatory regime for systemic payment systems using sterling-denominated stablecoins and related service providers.

This development follows an October 30 announcement by the government, proposing three institutions to regulate fiat-backed stablecoins and make them accessible for payments. The institutions include the Financial Conduct Authority (FCA), Payment Systems Regulator (PSR), and Bank of England.

End-to-End Regulation of Stablecoins

On November 6, the Bank of England published the UK’s proposed stablecoin regulatory regime, stating that the framework would “maintain confidence in money and payments,” which is core to preserving financial stability.

According to the document, the new regime would target business models focused on payments-related activities and innovation within payments. Besides constraining the wholesale use of stablecoins at a systemic scale, the framework would also focus on regulating retail uses and enforcing proposed limits.

“It follows the principle of ‘same risk, same regulatory outcome’. To the extent that systemic payment systems using stablecoins pose similar risks as other systemic payment systems, they should be subject to equivalent regulatory standards,” the document read.

Notably, the proposed regime would outline specific requirements for a range of functions that enable the use of stablecoins, including payment system/transfer, stablecoin issuance as the settlement asset, and storage of stablecoins.

The Regulatory Requirements

While the regime would leave the transfer function in the Bank of England’s “regulatory hook,” it will require the payment chain to designate an entity as the payments system operator. The entity will have an overview mandate of assessing risks from different parts of the payment chain and enacting appropriate controls.

To ensure that stablecoins hold their value and “can be used for payments with full confidence,” the regime proposes that issuers would be mandated to fully back their coins with deposits at the Bank of England.

In terms of stablecoins storage, the proposed regime seeks to ensure that wallet providers are accountable for preserving coinholders’ legal rights and ability to redeem the stablecoins at par in fiat at all times.

Read why Binance recently suspended operations in the UK:
Binance Suspends Operations in UK Amidst Regulatory Shift

Stay updated on how the FCA resisted political pressure to open UK crypto market access:
FCA Resisted Political Push to Open UK Crypto Market Access

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Brian Danga

Brian Danga, a Kenyan crypto reporter, is dedicated to delivering breaking news and updates from the cryptocurrency world. With a background as a Web3 writer and project manager, he recognizes the importance of unbiased reporting. Holding an LLB degree from the University of Nairobi, Brian's analytical skills contribute to his accurate news reporting. His personal interests include cooking, watching documentaries, reading, and engaging in intellectual discussions.