UK Government Unveils Comprehensive Strategy for Regulating Fiat-backed Stablecoins
Summary:
The UK government has outlined its plans to regulate fiat-backed stablecoins. The Treasury will propose legislation in 2024 to place stablecoins under the Financial Conduct Authority's (FCA) jurisdiction. Non-fiat-supported stablecoins will be excluded from regulated payment systems but will not be banned outright. The FCA will gain authority to demand stablecoin issuers hold all reserve funds in a statutory trust, and specific rules will govern insolvency procedures.
The UK government has recently unveiled its regulatory strategy for fiat-supported stablecoins. The proposal, issued on the 30th of October, focuses on the successful integration and regulation of fiat-supported stablecoins within the UK's payment systems. It states that the Treasury of His Majesty is planning to propose distinct legislation in 2024, which will place fiat-supported stablecoins under the jurisdiction of the Financial Conduct Authority (FCA). Intriguingly, the Treasury is considering holding local businesses, branded as "payment arrangers" and approved by the FCA, accountable for ensuring foreign stablecoins comply with local standards. The use of non-fiat-supported stablecoins, which include algorithmic ones, will be prohibited in regulated payment systems. Despite this, the proposal doesn't explicitly prohibit these transactions but notes that they will remain unregulated. Additionally, the Treasury regards these types of stablecoins as akin to other non-guaranteed crypto-assets.
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In terms of standard stablecoins, the FCA will gain the authority to require issuers of stablecoins to maintain all reserve funds in a legally constituted trust. The conditions for the trust will be determined by the FCA's guidelines, including the stipulations about returning funds if the company fails. In that case, UK stablecoin issuers will be subjected to the Insolvency Act 1986. The primary regulatory structure for all crypto categories, exemplified by the Financial Services and Markets Act, was approved by the UK's upper parliament house in June 2023. This piece of legislation, often referred to as FCMA 2023 within the Treasury’s document, is the foundation from which the Treasury, the Bank of England and the FCA derive their authority to oversee cryptocurrency and specifically, stablecoins.
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Published At
10/30/2023 11:57:30 AM
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