February 6 remains the comment deadline on the UK Financial Conduct Authority (FCA) discussion paper relating to stablecoin regulation and custody. The Association for Financial Markets in Europe (AFME) provided the FCA with its comments on schedule.
The initial deadline for responses to the discussion papers concerning regulating stablecoins in the United Kingdom was February 6. However, to accommodate these papers, the Bank of England (BOE) has extended the comment period until February 12 in the morning.
It was believed that the publication of the discussion papers on November 6 as part of a “joint publication package” marked the beginning of comprehensive crypto-asset regulation. While thematically connected, the documents published by the agencies take distinct approaches to the subject matter.
Concerning using a retail-focused stablecoin backed by sterling in systemic payment systems, the BOE primarily addressed transfer functions and wallet provider requirements.
The FCA discussion paper focused on backing and custodianship, auditing and reporting, prudential requirements, and various stablecoin use cases. It prioritized the “same risk, same regulator outcome” principle.
The FCA will additionally oversee custodianship; however, the BOE acknowledged its potential to impose supplementary obligations beyond those of the FCA, including but not limited to anti-money laundering and Know Your Customer requirements for unhosted wallets and off-chain transactions.
Dual regulation may also apply to services that “may be systemic in and of themselves or provide essential services to systemic payment systems utilizing stablecoins or recognized stablecoin service providers.”
James Kemp, managing director of technology and operations at AFME, praised the British proposals as a “positive step.” Concerning the treatment of security credentials, he voiced apprehension.
The FCA defines securities tokens as crypto assets that already satisfy the criteria for a specified investment as defined in the Regulated Activities Order (RAO) of the Financial Services and Markets Act 2000. Consequently, these tokens are already liable for regulatory oversight. Kemp stated,
“Security tokens […] are inherently securities and should be treated as such throughout their lifecycle. To preserve market functioning, it is important that they are not subject to the separate regulatory treatment and territorial scope for custody proposed by the FCA.”
Additionally, the AFME spokesman recommended that the FCA withhold portions of the proposal concerning stablecoins until mature markets and international frameworks develop overseas.
