Stablecoin issuance and custody when done in or from the UK would become regulated activities under the Financial Services and Markets Act.
The UK government has announced plans to bring forward legislation to regulate certain cryptoassets known as stablecoins by early 2024.
In a policy update published today, HM Treasury outlined proposals to regulate the issuance, custody and use of fiat-backed stablecoins through amendments to existing financial services legislation. Fiat-backed stablecoins are cryptographic tokens designed to maintain a stable value by referencing fiat currencies like the pound or dollar.
Under the proposals, stablecoin issuance and custody when done in or from the UK would become regulated activities under the Financial Services and Markets Act. This would enable the Financial Conduct Authority (FCA) to authorize firms and make rules for the sector.
The use of stablecoins in payments would also fall under the regulatory perimeter through changes to the Payment Services Regulations 2017. This would cover payments from consumers and businesses using stablecoins issued either in the UK or overseas.
The Bank of England will have powers to oversee systemic stablecoin firms that could threaten financial stability. The Payment Systems Regulator would likewise regulate systemic stablecoin payment systems.
Stablecoin regulation forms the foundation for the UK's ambitions to be a global crypto-asset hub. The measures look to balance risks around these rapidly evolving technologies, enabling their potential benefits.
The proposals will now pass through the usual parliamentary processes before becoming law. The government aims to have stablecoin regulation in place sometime in 2024.
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