The Bank of England (BOE) and the UK’s Financial Conduct Authority (FCA) are seeking public feedback on their proposed regulations for stablecoins and the broader crypto sector by February 6, 2024.
The BOE aims to regulate “systemic stablecoins” to prevent potential disruptions to financial stability, while the FCA will oversee the wider crypto industry.
The BOE focuses on stablecoins tied to the British pound, as they could be widely used for payments. They are considering imposing limits on individual stablecoin holdings to reduce risks.
The FCA is requiring issuers of fiat-backed stablecoins to seek authorization for circulation in the UK. These stablecoins must be backed by appropriate assets equal to their value, and issuers must ensure easy conversion to fiat currencies.
Both regulatory bodies are concerned about maintaining a clear distinction between stablecoins and traditional deposits. Regulated stablecoin issuers are not allowed to offer income or interest to consumers, even though this may be perceived as unfair in a high-interest rate environment.
The UK government’s recent plans for crypto regulation have led to these proposals, driven by global concerns over the rise of stablecoins and the collapse of Terraform Labs.
These regulatory proposals for stablecoins and the broader crypto sector aim to strike a balance between innovation and safeguarding financial stability, aligning with global efforts to address emerging challenges in the crypto industry.