November 7, 2023

UK Authorities Unveil Framework for Stablecoin Regulation

The Bank of England (BOE) and the UK Financial Conduct Authority (FCA) have revealed intentions to oversee the usage of stablecoins as a means of payment for purchasing goods and services.

The Bank of England (BOE) and the UK Financial Conduct Authority (FCA) have jointly unveiled proposal papers aimed at supervising stablecoins, marking a pivotal move in fortifying the regulatory landscape within the ever-expanding realm of cryptocurrencies.

An essential aspect of these plans entails stablecoin issuers obtaining authorization for the circulation of fiat-backed stablecoins in the UK, as outlined by the FCA. Emphasizing the necessity for these stablecoins to be backed by assets easily convertible into fiat currencies, irrespective of technical or liquidity concerns, the regulators are striving to establish a robust framework for their operation.

These regulatory initiatives are part of the broader regulatory strategies recently disclosed by the UK government to oversee the cryptocurrency industry. The consultation papers released mark the initial phase in shaping this new regulatory system, with stakeholders' feedback set to refine the rules in subsequent consultations.

The impulse behind this move to regulate stems from the proposals of major tech entities like Meta (formerly Facebook) and PayPal to issue stablecoins. Furthermore, the collapse of Terra, a stablecoin startup the previous year, has underscored the necessity for comprehensive oversight within the sector.

In positioning itself as a potential hub for cryptocurrency operations, the UK has successfully integrated stablecoins into the country's payment regulations as of June. The legislation governing fiat-backed stablecoins is slated to be enforced in the initial months of the coming year.

The BOE's regulatory focus primarily centers on stablecoins pegged to the value of the British pound sterling, recognizing their potential widespread utilization in various payment transactions.

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