In a significant development in the United Kingdom’s approach to crypto-asset regulation, the Bank of England (BOE) has announced an extension of the comment period for its discussion paper on stablecoin regulation. Initially set for February 6, the deadline has now been moved to the morning of February 12, allowing stakeholders additional time to provide insights. However, the Financial Conduct Authority (FCA) has maintained its original deadline for comments on a separate but related discussion paper, which remained due on February 6.
This move is part of the UK’s broader strategy to create a comprehensive regulatory framework for crypto-assets, marked by the release of discussion papers by both the BOE and FCA on November 6. These documents, forming a joint publication package, signify the country’s first steps towards establishing detailed guidelines for the stablecoin sector and crypto-assets.
Diverse Perspectives on Stablecoin Regulation
The BOE’s discussion paper focuses on the implications of introducing a sterling-backed retail-focused stablecoin into systemic payment systems. It covers critical aspects such as transfer functions and requirements for wallet providers, highlighting the central bank’s concern over maintaining stability and security within the financial system. The emphasis is on ensuring that new technologies complement the existing financial infrastructure without compromising safety or efficiency.
Conversely, the FCA’s paper adopts a broader view, examining various stablecoin use cases beyond just payment systems. It delves into auditing and reporting, prudential requirements, backing, and custodianship of stablecoins.
A key principle highlighted in the FCA’s approach is the idea of “same risk, same regulator outcome,” ensuring that traditional financial services and crypto-assets facing similar risks are subject to comparable regulatory standards. This includes the regulation of custodianship, with the FCA indicating potential additional requirements from the BOE in areas such as off-chain transactions, anti-money laundering (AML), and know-your-customer (KYC) processes for unhosted wallets.
UK Crypto Proposals Receive Mixed Reviews from AFME
The Association for Financial Markets in Europe (AFME) has actively engaged in this consultation process, submitting its comments to the FCA within the original deadline. James Kemp, AFME’s managing director of technology and operations, has praised the UK’s regulatory proposals as a positive step forward.
However, Kemp raised concerns regarding the regulatory treatment of securities tokens, suggesting that they should be treated consistently as securities throughout their lifecycle to preserve market functionality. This feedback underscores the industry’s call for a balanced approach that recognizes the unique characteristics of crypto-assets while aligning them with established regulatory frameworks.
Moreover, the AFME has advised caution in applying the proposed regulations to stablecoins issued overseas, advocating for a wait-and-see approach until international frameworks and markets mature. This reflects a broader understanding within the industry of the need for global coordination in crypto-asset regulation to avoid market fragmentation and ensure a level playing field.
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