The deadline to share thoughts on stablecoin regulation in the UK was initially set for February 6. However, the Bank of England (BOE) has decided to allow more time for feedback on its discussion paper, extending the deadline to the morning of February 12. The Financial Conduct Authority (FCA) kept its original deadline for comments, February 6. The Association for Financial Markets in Europe (AFME) managed to submit their feedback to the FCA as scheduled.
These discussion papers, released on November 6, were part of a combined effort to start the process of regulating cryptocurrencies more thoroughly. Although they cover similar topics, the papers from the BOE and FCA look at stablecoins from different perspectives.
The BOE’s paper focuses on how a stablecoin, backed by the British pound and aimed at everyday use, could fit into the country’s payment systems. It talks about transferring money and what rules should apply to companies providing digital wallets. The FCA’s paper looks at various ways stablecoins might be used and discusses topics like audits, financial safeguards, how stablecoins should be supported, and who should keep them safe. It stresses that similar risks should be managed by the same regulatory standards.
While the FCA plans to oversee who keeps the stablecoins safe, the BOE suggests it might introduce additional rules for things like transactions that don’t happen on the blockchain and for meeting Anti-Money Laundering and Know Your Customer standards with wallets that don’t use hosted services. Services that are crucial on their own or provide essential services to major payment systems that use stablecoins might have to follow the BOE and FCA regulations.
James Kemp, from AFME, complimented the UK’s approach as a positive move. However, he raised concerns about how tokens that represent securities are handled.
The FCA views securities tokens as cryptoassets that fit the existing regulations for specific types of investments under the Financial Services and Markets Act 2000. Kemp argued:
“Security tokens […] are essentially securities and should always be recognized as such. To ensure the market works well, they must ben’t regulated differently or have different rules for keeping safe, as the FCA suggests.” He also advised that the FCA wait on making rules for stablecoins from outside the UK until the rest of the world has developed consistent regulations and the markets have matured.
The UK plans to implement stablecoin regulations by 2025.
