The Bank of England (BOE) and the UK Financial Conduct Authority (FCA) have published proposal papers outlining plans to regulate stablecoins, in a significant step towards strengthening regulatory frameworks in the expanding cryptocurrency sector.
UK Financial Regulators Announce Plans to Supervise Stablecoins in the Expanding Crypto Sector
The FCA has announced that stablecoin issuers will need to obtain authorization for fiat-backed stablecoins to circulate in the UK.
The supervisor also argues that stablecoins in circulation should be backed by assets that can be easily converted into fiat currencies, regardless of technical or liquidity concerns.
These proposals follow wider regulatory plans for the crypto industry recently revealed by the UK government.
The consultation papers represent the first stage in the development of this new regulatory regime. Feedback from stakeholders will be collected and used to refine the rules ahead of a final consultation.
This move towards regulation is partly due to proposals from major tech players such as Meta (formerly Facebook) and PayPal to issue stablecoins.
Additionally, the collapse of Terra, a stablecoin startup, the previous year highlighted the importance of the need for comprehensive oversight.
Positioning itself as a potential crypto hub, the UK successfully included stablecoins within the scope of the country's payments regulations in June.
The legislation on fiat-backed stablecoins is expected to come into force in the first months of next year.
The BOE's regulatory focus is on stablecoins pegged to the value of the British pound sterling, as they are seen as likely to be widely used in payments.
*This is not investment advice.