- The proposed regulations aim to support innovation while ensuring stability and trust in the crypto sector.
- Stablecoin issuers may have to keep reserve assets with independent third-party custodians and guarantee redemptions at stable value.
- The Bank of England will introduce further consultation for stablecoins at systemic scale later this year.
- The FCA’s draft rules also introduce stricter requirements for crypto custody firms to protect consumer assets.
The Financial Conduct Authority (FCA), the financial regulator in the United Kingdom, announced on May 28 that it is asking the public to comment on new regulations for stablecoins and the storage of cryptocurrencies in the country. The proposal is part of the FCA’s wider plan to regulate digital assets and maintain trust in financial markets.
According to the FCA, these draft rules draw on industry feedback from roundtable events and consultations.
David Geale, executive director of payments and digital finance at the FCA, said the agency aims “to strike a balance in support of a sector that enables innovation and is underpinned by market integrity and trust.”
At present, much of the crypto sector remains unregulated in the UK.
The FCA stated that its rules are designed to ensure regulated stablecoins keep their value. The regulator recommends that stablecoin issuers use independent third-party custodians to hold backing assets. It also wants issuers to guarantee customers can convert stablecoins back into the equivalent currency—such as U.S. dollars or British pounds—at a fixed value, with payment processed by the end of the next business day. A full summary of the FCA’s consultative request is available here.
Sarah Breeden, deputy governor at the Bank of England, said that for stablecoins expected to reach a large scale, the Bank will release a separate consultation paper later in 2024.
Alongside stablecoins, the FCA is proposing safeguards for companies that store crypto on behalf of customers, known as crypto custody firms. These firms would need to ensure assets are well-protected and accessible to clients at all times. The FCA’s proposal on custody rules is detailed in a discussion paper here.
The measures come as the UK government has revealed plans for a comprehensive regime to make the country a leader in crypto regulation. The FCA says its proposed rules are part of ongoing efforts to reduce risks and protect customers in the crypto sector.
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