Today, the Bank of England has extended the deadline for citizens to provide feedback on its proposed regulatory regime for UK stablecoins. The central bank’s discussion paper focuses on rules for sterling-denominated stablecoins, which it believes are the most likely cryptocurrencies to be adopted for nationwide payments.
The Proposed UK Stablecoin Rules
The priorities of the proposed rules include maintaining the constant convertibility of stablecoins and regulating firms governing blockchains used for stablecoin payments.
The Financial Conduct Authority (FCA) has also released a separate discussion paper examining stablecoin use cases and auditing/reporting requirements for stablecoin issuers and custodians.
Response from Stakeholders and Experts
Many stakeholders and experts, including the Association for Financial Markets in Europe (AFME) and British crypto advocacy group CryptoUK, have already responded to the regulatory frameworks. They generally support the recommendations but emphasize the need to avoid jurisdictional fragmentation and increase the flexibility of backing assets for stablecoins.
What Should Back Stablecoins?
CryptoUK suggests adopting rules already used in other regions and expanding the eligible collateral for backing stablecoins beyond US government debt and short-term cash deposits. They argue that this will increase diversification and reduce risks for issuers and consumers.
Stablecoin regulations are expected to take effect in the UK in 2025.
Hot Take: European Markets Org Praises Bank of England On UK Stablecoin Rules
The European Markets Organization commends the Bank of England’s proposed UK stablecoin rules. They believe that these rules are generally appropriate and highlight the importance of avoiding jurisdictional fragmentation. However, they recommend expanding the range of assets eligible as collateral for backing stablecoins to increase diversification and reduce risks. Overall, they view these regulations as a positive step towards establishing a clear framework for stablecoin operations in the UK market.
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