UK Central Bank Consultation Response on Systemic Stablecoins

UK Central Bank Releases Consultation Response on Systemic Stablecoins

The Bank of England (BoE) has released a consultation response on systemic stablecoins, reaffirming its commitment to a systemic stablecoin regime. The framework outlines co-supervision arrangements between the BoE and the Financial Conduct Authority (FCA), with the BoE leading on prudential matters and the FCA leading on conduct. The consultation document suggests that systemically important payment service providers (PSPs) or electronic money institutions (EMIs) would fall under the oversight of the Financial Market Infrastructure SAR in cases of insolvency. The BoE’s Prudential Regulation Authority, Payment Systems Regulator, and other regulatory bodies would also be involved in the collaborative approach.

Key Points:

BoE and FCA agree on co-supervision arrangements for systemic stablecoins.
BoE to lead on prudential matters, ensuring financial stability.
FCA to lead on conduct.
Regulators to outline collaborative efforts in a memorandum.
BoE to have authority to prevent FCA action against systemic institutions.

In June, the UK passed legislation to regulate cryptocurrencies and stablecoins, granting regulators the authority to establish a tailored framework for the digital asset sector. The BoE has plans to release rules governing systemic stablecoins in 2023. The legislation has been praised as a landmark piece of legislation that gives control over the financial services rulebook back to the national government, unlocking investment and fostering innovation.

Hot Take

The release of the consultation response by the UK central bank demonstrates its commitment to establishing a regulatory framework for systemic stablecoins. By clearly outlining the roles and responsibilities of regulatory bodies, the BoE aims to ensure financial stability while facilitating the safe adoption of cryptocurrencies in the UK. This proactive approach to regulation is a positive step towards fostering innovation and building confidence in the digital asset sector.