A Closer Look at Stablecoin Regulation in the UK
The Financial Conduct Authority (FCA) and the Bank of England (BOE) have recently released a series of documents addressing stablecoin regulation in the United Kingdom. These documents include a discussion paper by the FCA, a similar paper by the BOE, a letter from the BOE’s Prudential Regulatory Authority (PRA) to CEOs of deposit-taking institutions, and a “cross-authority roadmap” released by the BOE to connect these documents.
On October 30, His Majesty’s Treasury provided an overview of their plans for stablecoin regulation, setting the stage for these releases. The FCA’s discussion paper provides a more detailed exploration of stablecoin use cases, including both retail and wholesale scenarios. It covers topics such as auditing and reporting, backing assets’ custodian independence, and the issuer’s ownership of coins.
Applying Existing Regulations to Stablecoins
The FCA proposes applying existing prudential requirements for regulated stablecoin issuers and custodians to other crypto assets in the future. They suggest using the client assets regime as a basis for rules on redemption and custodianship, as well as utilizing existing frameworks for operational resilience and financial crime.
The BOE’s paper focuses on sterling-based retail-focused stablecoins in systemic payment systems. It examines transfer function requirements for wallet providers and other services. Some areas overlap with the FCA’s discussion on stablecoin issuers and deposit protection.
Hot Take: Implications for Stablecoin Holders
The UK FCA is proposing that stablecoin holders should have the right to direct redemption, making issuers more similar to banks. This raises potential issues regarding anti-money laundering (AML) and know-your-customer (KYC) requirements for issuers.
Sources:
FCA Discussion Paper,
BOE Paper,
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