The Bank of England (BoE) has published a discussion paper today (Monday), revealing its plans to regulate stablecoins, which pose a “significant risk to financial stability” and can “undermine public confidence in money and payments.”
BoE Will Regulate Stablecoins
The discussion paper followed an announcement by HM Treasury last week. According to the announcement, the Financial Conduct Authority (FCA) will oversee the broader cryptocurrency industry in the country. Meanwhile, the central bank will be tasked with regulating these “systemic stablecoins” and their issuers.
“Stablecoins have the potential to be used by many people in the UK for everyday payments. It is important for policymakers to set out the regulatory requirements so innovators can plan ahead and so that innovation can be adopted safely,” the BoE noted.
Meanwhile, the UK government plans to bring fiat-backed legislation early next year. It will complement the Financial Services and Markets Act 2023, which the UK lawmakers already passed last June, clearing crypto to be regulated as a regulated financial instrument.
Now, the discussion paper revealed by the central bank detailed the “exploratory phase in developing the new regime.” It will release the final proposed framework after receiving feedback from the industry.
Other Regulators on Stablecoins
The FCA also published a discussion paper today “to help develop our regime for fiat-backed stablecoins including when used as a means of payment.” It clarified that stablecoin issuers will need to seek authorization to operate with the fiat-backed stablecoins in the country.
Both BoE and the FCA are seeking public consultations by the end of 6 February 2024.
Simultaneously, the UK’s Prudential Regulations Authority (PRA) released a letter, covering the “innovations in the use by deposit-takers of deposits, e-money, and regulated stablecoins.”
“Contagion risks will be lower for stablecoins used in systemic payment systems regulated by the Bank, than for e-money or other regulated stablecoins captured by the FCA’s regime,” the PRA’s letter added.
