Today, the Bank of England extended the deadline for citizens to provide feedback on its proposed regulatory regime for UK stablecoins from February 6 to February 12.
The central bank’s discussion paper focused on rules for sterling-denominated stablecoins, which it believes are the most likely cryptocurrencies to be adopted for payments nationwide.
The Proposed UK Stablecoin Rules
Priorities include ensuring the “singleness” of money by maintaining the constant convertibility of stablecoins and regulating firms governing blockchains on which payments stablecoins are used.
We’ve extended the deadline so you can give us your feedback to the Discussion Paper on the Regulatory regime for systemic payment systems using stablecoins and related service providers.
Have your say here: https://t.co/G3RaQLp86C
Consultation closes Monday, 12 February, 10am. pic.twitter.com/THnuNnIXlo
— Bank of England (@bankofengland) February 6, 2024
It also accompanied a separate discussion paper from the Financial Conduct Authority (FCA) examining stablecoin use cases and auditing/ reporting requirements for stablecoin issuers and custodians.
Many stakeholders and experts have already issued responses to the regulatory frameworks, including the Association for Financial Markets in Europe (AFME). James Kemp – the AFME’s managing director of technology and operations – said it was a “positive step,” highlighting the FCA’s insistence that existing laws already cover securities tokens.
“Security tokens are inherently securities and should be treated as such throughout their lifecycle,” Kemp told Cointelegraph. “To preserve market functioning, it is important that they are not subject to the separate regulatory treatment and territorial scope for custody proposed by the FCA.”
What Should Back Stablecoins?
British crypto advocacy group CryptoUK also said the recommendations are “generally appropriate,” but recommended that the FCA adopt rules already used in other regions to avoid “jurisdictional fragmentation.”
They also suggested that more assets be made eligible collateral for backing stablecoins beyond U.S. government debt and short-term cash deposits.
“A higher degree of flexibility in backing assets will increase diversification and reduce the risks facing issuers and by extension the risks that consumers face by investing into this sector,” the group argued.
Tether USD (USDT), the world’s leading stablecoin, primarily backs its 100 billion tokens using cash and US debt. It also includes multi-billion dollar allocations to gold and Bitcoin (BTC) in its reserves.
Stablecoin regulations are expected to take effect in the U.K. in 2025.
On U.S. shores, stablecoin legislation is still a tricky issue for both major political parties to agree on. On Tuesday, Treasury Secretary Janet Yellen told Congress that new legislation for stablecoins and non-security cryptos would be necessary to fill enforcement gaps for regulatory agencies like the CFTC and SEC.
