Stablecoins are a new type of digital assets used to maintain a stable value.
In the future they can be used for retail payments.
The proposals of the Bank of England for a regulatory framework on stablecoins apply to all future payment systems that use this type of crypto-assets in the UK on a systemic scale. The role of the regulatory framework is to protect consumers and financial stability and prevent money laundering.
The consultation paper of the Bank of England explains how the Bank would regulate the activities of operators of payment systems that use stablecoins as well as other entities providing services to those payment systems, such as stablecoin issuers and wallet providers, where they might pose risks to financial stability.
Sheldon Mills, Executive Director for Consumers and Competition at the Financial Conduct Authority (FCA), said: ‘Stablecoins have the potential to make payments faster and cheaper for all, and that’s why we want to offer firms the ability to utilise this innovation safely and securely. Getting views from others is essential for creating proportionate rules that benefit consumers and firms and also meet our objectives’.
Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, mentioned: ‘Stablecoins can enhance digital retail payments in the UK. With this comes the need to make sure there is robust and clear regulation in place. Our proposals aim to support safe innovation so that firms can understand the risks they need to manage and ensure that the public can be confident in all forms of digital money and payments’.
The FCA warns that crypto-assets, now including stablecoins, are largely unregulated and very risky.
The FCA and the Bank will be accepting feedback on stablecoin regulation from the public by 6 February 2024.
More details can be found here:
https://www.bankofengland.co.uk/news/2023/november/fca-and-bank-of-england-publish-proposals-for-regulating-stablecoins