UK government to regulate crypto starting with Bank of England’s proposal targeting stablecoins

The Bank of England (BOE) and the Financial Conduct Authority (FCA) recently published a roadmap for regulating stablecoins — one of the aspects of the crypto industry that the bank is the most concerned with.

Both entities published their proposals, billing them as an efficient way of making payments both faster and cheaper for consumers and retailers. At this time, BOE and the FCA are asking for the public feedback regarding the proposals,

UK authorities are covering all aspects of stablecoin issuance, use, and risk

According to reports, the UK Treasury is considering adding changes to the legislation that would allow the use of fiat-backed stablecoins for making retail payments for goods and services. The FCA stated that it explores the regulation regarding the issuance and custody of stablecoins, as well as their use as a means of payment under the Payment Services Regulations.

FCA’s executive director of consumers and competition, Sheldon Mills, noted that stablecoins hold great potential to increase the speed of payments while reducing their cost. This is why the FCA believes that it would be beneficial to offer companies the ability to use this innovative approach, but it must first ensure that it is safe and secure.

Mills added that getting the perspective of the public and financial experts is crucial for creating rules that would serve both the companies and consumers.

Meanwhile, the Bank’s paper outlines how the BOE would regulate operators of systemic payment systems using stablecoins. This is a payments system that could pose risks to financial stability, if used for retail payments in the UK without the proper rules set into place. The bank also intends to regulate entities providing services to these payment systems, including wallet providers, issuers, and alike.

BOE’s deputy governor for financial stability, Sarah Breeden, stated that stablecoins can enhance digital retail payments in the country. “With this comes the need to make sure there is robust and clear regulation in place. Our proposals aim to support safe innovation so that firms can understand the risks they need to manage and ensure that the public can be confident in all forms of digital money and payments.”

PRA published a letter with concerns involving different forms of digital money

It is also worth noting that the UK’s Prudential Regulatory Authority (PRA) also published a Dear CEO letter, in which it says that it expects deposit-takers to address the risks that might come from issuing a variety of forms of digital money, as well as how such risks could be countered.

Lastly, the letter details the PRA’s broader expectations for banks involving the use of digital money for retail or wholesale innovations. This concerns areas such as anti-money laundering, operational resilience, counter-terrorist financing, and more.