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UK Moves Closer to Stablecoin Regulation with Key Financial Authority Documents

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The United Kingdom is laying the groundwork for stablecoin regulation, as indicated by recent publications from the Financial Conduct Authority (FCA) and the Bank of England (BOE). Though the new regulatory framework is not expected to be implemented until 2025, the latest documents give insight into the direction UK regulators are considering.

On November 6, the FCA released a comprehensive discussion paper, while the BOE issued both a discussion document and a cross-authority roadmap to outline the regulatory approach. Additionally, the BOE’s Prudential Regulatory Authority (PRA) sent out a letter to CEOs of deposit-taking entities detailing expectations and guidance.

Following an initial brief on regulatory intentions from His Majesty’s Treasury on October 30, these documents delve deeper into the proposed regulatory landscape for stablecoins. The FCA paper discusses potential applications of stablecoins for both retail and wholesale markets and addresses issues related to auditing, coin backing, and the management of backing assets.

A key principle highlighted in the FCA’s discussion is “same risk, same regulatory outcome,” suggesting that traditional financial rules around redemption, custody, operational resilience, and financial crime could be adapted for stablecoins. The FCA also indicates an eventual extension of these stablecoin-specific regulations to a wider array of crypto assets.

The BOE’s contributions focus on sterling-based retail stablecoins used in systemic payment systems, discussing the operational aspects and considering the regulatory framework for wallet providers. The BOE acknowledges its reliance on the FCA for regulating custodial services but doesn’t rule out setting additional requirements.

The PRA’s letter to CEOs reinforces the necessity of distinguishing between e-money or regulated stablecoins and traditional deposits to avoid customer confusion. It also stresses the importance of keeping deposit and issuance activities separately branded for clarity.

These documents collectively signal a cautious but clear stride towards establishing a regulated stablecoin environment in the UK. With an emphasis on adapting existing financial regulations, the UK authorities aim to maintain market integrity and protect consumers while fostering innovation in the burgeoning field of digital currencies.

Jay Solano

Jay Solano

Jay is a crypto and NFT enthusiast dedicated to exploring the dynamic world of digital assets. As a crypto blog writer, he is sharing his knowledge of the latest trends, breakthroughs, and investment opportunities in the blockchain world.

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