In a long-awaited update on its plans for the UK’s crypto regulatory framework, on 30 October 2023, HM Treasury issued three interlinked policy documents on the future regulation of crypto, covering fiat-backed stablecoins, the wider cryptoasset regulatory regime, and the failure of systemic digital settlement asset (DSA) firms. The regulators followed shortly after, issuing a set of papers on 6 November 2023 on the forthcoming stablecoin regime: a discussion paper from the FCA on stablecoin regulation, a discussion paper from the Bank of England (BoE) on the regulation of systemic payment systems using stablecoins, a PRA Dear CEO Letter to deposit-takers on issues relating to digital money, and a cross-authority roadmap paper on innovation in payments and money (which explains how the regimes interact and the regulators’ approach to dual regulation). Both discussion papers close to comments on 6 February 2024.
This briefing covers stablecoin regulation and the failure of systemic DSA firms – for more on the wider cryptoasset regulatory regime, see our dedicated alert issued alongside this one: United Kingdom: The future of crypto regulation – Treasury provides clarity on the wider regime.
The Treasury’s stablecoin policy update sets out more detail on the government’s plan to regulate certain activities relating to fiat-backed stablecoins, almost 18 months after it first confirmed its plans to move forward with the regulation of stablecoins in the UK; for more on the Treasury’s announcements at the time, see our related client alert. Whilst the update essentially confirms the approach previously set out by the Treasury, there are some evolving details and clarifications worth exploring. However, although the Treasury has already started to prepare for stablecoin regulation through the Financial Services and Markets Act 2023 (which contains measures allowing the Treasury to bring activities relating to fiat-backed stablecoins within the regulatory perimeter), it remains the case that most of the detailed requirements of the regime are left to the forthcoming secondary legislation and rules issued by the regulators. The FCA and BoE discussion papers give a helpful indication of how the finer details of the regime will shake out, but there is plenty of room for the regulators to manoeuvre, and further consultations to follow before the shape of regulation is fully set.
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