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Financial Services Law Insights and Observations

Bank of England and Financial Conduct Authority seek feedback on stablecoin regulatory proposals

Securities Of Interest to Non-US Persons Digital Assets Cryptocurrency Stablecoins

Securities

On November 6, the Bank of England and the Financial Conduct Authority (FCA) requested feedback on their proposal to regulate a form of cryptocurrency known as stablecoins. Stablecoins are a cryptoasset that “maintain a stable value relative to a fiat currency by holding assets as backing” and fall within the UK Government’s plan to regulate them for future retail payment use. In addition to retail use, the Bank of England and FCA’s wish to regulate stablecoins is meant to “prevent money laundering… and safeguard financial stability.”

The Bank of England published a handy road map with similar regulators on how to best navigate rolling out new technological payment innovations, such as the digital pound. Each of the financial regulators provided two white papers: (i) the FCA’s discussion paper outlines how the FCA can regulate cryptoassets under the Financial Services and Markets Act 2000, including providing information on backing assets, custody requirements, and allowing overseas stablecoins used as a form of tender in the UK; and (ii) the Bank of England’s discussion paper examines proposed regulations for sterling-dominated stablecoins in the hopes of becoming widespread for retail use. Furthermore, this paper details proposed regulations for everyday use, including money transfers and providing digital wallets.

Both regulators’ comment period is open until February 6, 2024.