The UK government has released an update on its plans to regulate fiat-backed stablecoins. Document from October 30th It aims to facilitate and regulate the use of fiat-pegged stablecoins in UK payment chains.
According to the document, the Treasury intends to introduce specific legislation to Parliament in 2024, mandating regulation of fiat-backed stablecoins from the Financial Conduct Authority (FCA).
In particular, the Treasury wants to make local companies recognized by the FCA as “payment arrangers” and give them responsibility for ensuring that stablecoins from abroad comply with local standards.
Non-fiat stablecoins, including algorithmic stablecoins, are not allowed on regulated payment chains. However, the document does not impose a direct ban, but states that “these transactions are unregulated”. Additionally, according to the Treasury Department, they are subject to the same requirements as non-fiat crypto assets.
For fixed stablecoins, the FCA is empowered to require stablecoin issuers to hold all holdings in legal trust. The terms of the trust are set out in FCA regulations, including repurchase obligations in the event of the company’s insolvency. In the latter case, UK stablecoin issuers will have to go through bankruptcy proceedings.
The central framework for all forms of cryptocurrencies, namely the Financial Services and Markets Act, was passed by the House of Lords, the upper house of the British Parliament, in June 2023. The Treasury document repeatedly refers to the bill and refers to it as FCMA 2023. Under the FCMA 2023, the Treasury, the Bank of England and the FCA will gain powers to specifically regulate cryptocurrencies and stablecoins.
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