The Bank of England and the Financial Conduct Authority have unveiled plans to regulate stablecoins in the latest sign of the government’s attempt to lure crypto companies to the UK.
In collaboration with the Financial Conduct Authority (FCA), the Bank of England (BOE) is implementing a strategy to oversee the stablecoin market, which comprises cryptocurrency that is often linked to a stable asset such as the British pound. This action follows the UK government’s announcement of its regulations governing virtual currency.
Stablecoins necessary for payment systems will be regulated by the BOE by early 2024, with the FCA handling the remainder of the cryptocurrency industry.
This choice fits into a larger plan that Prime Minister Rishi Sunak of the UK wants to see lead the country into the cryptocurrency space. Stablecoins are the focus of the BOE because they are seen as less risky for the financial system than other digital currencies when utilized in large-scale payment systems.
Any business that wishes to sell stablecoins in the UK must first get approval, according to the FCA. One noteworthy aspect of the UK plan is that it permits stablecoin providers to profit from interest or other returns derived from the assets that support their currency.
This may cause some controversy, though, as regulators are mindful that it may be perceived as unfair if interest rates rise and corporations profit while consumers do not.
The UK is aligning itself with other nations that have previously implemented comparable regulations, such as those in the European Union and Japan, by establishing these regulations.
This demonstrates a difference with the US, which still needs a defined set of legislation governing stablecoins and the larger cryptocurrency sector.
