The United Kingdom is set to implement new regulations allowing authorized financial firms to work with overseas stablecoins.
The new regulatory framework will be supervised by the Bank of England, the Financial Conduct Authority (FCA), and the Payment Systems Regulator (PSR) with a focus on minimizing potential risks and ensuring customer protection.
UK to Permit FCA Authorized Firms to Collaborate with Oversees Stablecoins
According to the UK Stablecoins Regulation, the UK is set to implement new regulations allowing authorized financial firms to work with overseas stablecoins. The new regime will target fiat-backed stablecoins, primarily those used for payments.
The regulations will have a dual focus. Firstly, they will govern the usage of fiat-backed stablecoins in payment chains. Secondly, they will regulate the issuing and custody of fiat-backed stablecoins when issued in or from the UK, irrespective of their intended purposes.
According to the FCA’s update, the government is exploring options to accommodate overseas stablecoins for UK payments for goods and services. To achieve this safely, they are considering an approach where the arranger of the payment, authorized by the FCA, would ensure that overseas stablecoins meet FCA standards for use in UK payment chains.
Furthermore, payment services involving fiat-backed stablecoins will be regulated through amendments to the PSR 2017, specifically targeting authorized or registered payment institutions. As such, firms conducting issuance and custody activities related to UK-issued fiat-backed stablecoins will be subject to FCA rules and guidance.
FCA Unveils Further Regulations for UK Stablecoins,
The FCA also plans to regulate the issuing and custody of UK-issued fiat-backed stablecoins for use in UK payment systems. However, stablecoins used on cryptocurrency exchanges won’t be covered until phase 2 of cryptoasset regulation. Other types of stablecoins, not backed by fiat, will still be allowed in payments but won’t be regulated. Disclosure rules are also being considered to inform consumers about unregulated crypto assets used in payments.
Additionally, the UK Stablecoins Regulation also mentions its plans to expand its regulations to cover the issuance and custody of UK-issued fiat-backed stablecoins under the Right of Abode (RAO). As such, the custody of fiat-backed stablecoins and security tokens will be regulated as a new activity under the RAO, with plans to expand it to cover more crypto assets in phase 2.