• The U.K. government has accelerated consultations around regulating stablecoins in the country.
• The report proposes that the BoE assumes a co-supervision role over stablecoins alongside FCA, and respondents want BoE to be given more power to prevent FCA from acting against service providers.
• Respondents also wanted clarity on the limitations of this power, emphasizing that regulation should be a stepping stone to attaining a liberal crypto market.
The United Kingdom government has published a new consultation report providing clarification on the proposed stablecoins regulation. This report sets achievable measures for the legal regulation of “systemically important stablecoins” and suggests a rebalancing of regulatory jurisdiction between the Financial Conduct Authority (FCA) and the Bank of England (BoE).
In 2022, an amendment was proposed to part five of the Banking Act which would include an additional “service provider” category and consequently allow recognition of high-risk payment providers. This latest consultation response report has now set achievable measures for legally regulating these systemically important stablecoins, proposing that BoE and FCA share supervisory roles. Respondents have called for BoE to be given more power in order to prevent FCA from undertaking certain actions which could pose financial stability concerns, such as those which may not be in line with service providers‘ interests.
Most respondents have vouched for BoEs primacy in regulating stablecoins ahead of FCA; however they have also called for clarity regarding any limitations placed upon this power so as not to obstruct industry growth or hinder progress towards creating a liberal crypto market. Similarly, both Japan and the US SEC are engaging with crypto investors through consultations so as to better understand what protections they need and how best to promote industry growth respectively..
The UK Governments proposal seeks to create an additional ‘service provider’ category under Part 5 of its Banking Act which will allow recognition of high risk payment providers such as those dealing with stablecoins. The consultation response report outlines achievable measures for legally regulating these systemically important stablecoins, suggesting that both BoE and FCA should take on supervisory roles when it comes to their regulation..
This consultation response report marks an important step forward in clarifying how best to regulate stablecoins in the UK while ensuring an environment conducive towards crypto industry growth without compromising financial stability nor disruptors‘ interests . It suggests that both BoE and FCA should take on supervisory roles when it comes to their regulation, although it is yet unclear exactly what powers each institution will hold over them