Crypto industry groups in the UK have expressed concerns about proposed regulations for the supervision of stablecoins by the Bank of England (BoE) and the Financial Conduct Authority (FCA).
These groups argue that regulatory plans need to be reworked due to perceived inconsistencies.
UK's Proposed Stablecoin Regulations Are Being Scrutinized by Crypto Advocates
In November, both the BoE and the FCA published discussion papers outlining their plans to regulate cryptocurrencies pegged to the value of fiat currencies or other stable assets.
While some aspects of the proposals have been well received, crypto advocates believe some elements need to be reconsidered.
The FCA plans to regulate the issuance and custody of fiat-referenced stablecoins, as well as their use as a means of payment.
The BoE, on the other hand, aims to supervise systemic payment systems that include stablecoins, referring to those that circulate so widely that they affect financial stability if their issuers go bankrupt.
However, crypto advocates have expressed concerns about potential incompatibility between the two regulators, particularly regarding issuers' ability to earn interest on reserve assets backing tokens in circulation.
The FCA recognizes that stablecoin issuers generate most of their income by investing in reserve assets and earning interest.
He suggests that under his regime, regulated stablecoin issuers could continue to retain income from interest and returns from backing assets.
In response, the BoE argues that systemic stablecoin issuers must hold backing assets in central bank reserves, which would limit their ability to earn interest.
*This is not investment advice.
