The original deadline for submitting responses to the discussion papers on stablecoin regulation in the United Kingdom was February 6th. However, the Bank of England (BOE) has decided to extend the comment period for its paper until the morning of February 12th. Meanwhile, the deadline for comments on the Financial Conduct Authority (FCA) discussion paper remained February 6th. The Association for Financial Markets in Europe (AFME) managed to submit its comments to the FCA on time.
These discussion papers were released on November 6th as part of a “joint publication package” that aimed to initiate comprehensive regulation of crypto-assets. While the papers are thematically related, they approach the topic from different perspectives.
The main focus of the BOE’s paper was on issues related to the use of a sterling-backed stablecoin that targets retail customers in systemic payment systems. It explored topics such as transfer functions and the requirements for wallet providers. On the other hand, the FCA’s discussion paper examined various use cases of stablecoins and emphasized areas such as auditing, reporting, prudential requirements, backing, and custodianship. The FCA stressed the importance of ensuring “same risk, same regulator outcome.”
The FCA will also regulate custodianship, although the BOE acknowledged the possibility of adding additional requirements in cases such as off-chain transactions and Anti-Money Laundering and Know Your Customer requirements for unhosted wallets. Services that could have a systemic impact or provide essential services to systemic payment systems using stablecoins or recognized stablecoin service providers may also be subject to dual regulation.
James Kemp, the managing director of technology and operations at AFME, commended the U.K.’s proposals as a positive step. However, he expressed concerns regarding the treatment of securities tokens.
According to the FCA, securities tokens are “cryptoassets that already meet the definition of a specified investment under the RAO [the Financial Services and Markets Act 2000 through the Regulated Activities Order] and are therefore already subject to regulation.” Kemp suggested that the FCA should delay implementing certain parts of the proposal related to stablecoins issued overseas until there are international frameworks and mature markets abroad.
Stablecoin regulations are expected to be enforced in the U.K. by 2025.