The UK government has published an update on its plans to regulate fiat-backed stablecoins. the document, published On October 30, it aims to facilitate and regulate the use of fiat-backed stablecoins in payment chains in the UK.
According to the document, the UK Treasury intends to introduce specific legislation to Parliament in 2024, bringing the regulation of fiat-backed stablecoins under the jurisdiction of the Financial Conduct Authority (FCA).
Notably, the Treasury is investigating making local “payment regulators”, licensed by the Financial Conduct Authority (FCA), responsible for ensuring stable foreign currencies meet local standards.
Stablecoins not backed by fiat currency, including algorithmic stablecoins, will not be allowed on regulated payment chains. However, the document does not impose a direct ban, but rather states that “such transactions will remain unregulated.” Furthermore, the Treasury Department considers them subject to the same requirements as unbacked crypto assets.
As for standard stablecoins, the Financial Conduct Authority (FCA) will have the power to require stablecoin issuers to hold all reserve funds in a legal trust. The terms of the trust will be set out in FCA rules, including recovery obligations if the company fails. In the latter scenario, UK stablecoin issuers would face action under the Insolvency Act 1986.
The central framework for all types of cryptocurrencies, the Financial Services and Markets Act, Passed the House of Lords – Upper House of the UK Parliament – in June 2023. The Treasury document repeatedly refers to the bill, calling it FCMA 2023. Under the FCMA 2023, the Treasury, the Bank of England and the Financial Conduct Authority (FCA) gain powers to regulate cryptocurrencies and their trading. Stablecoins in particular.
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