The Bank of England and HM Treasury have joined forces to introduce regulations for systemic payment systems involving stablecoins and related service providers. These regulations will specifically focus on stablecoins denominated in sterling that are used in day-to-day transactions. Simultaneously, the Financial Conduct Authority (FCA) is developing regulatory approaches for stablecoin issuers and custodians, and is seeking feedback from the industry on these proposals. Both organizations have released discussion papers outlining potential rules for the issuance and custody of stablecoins tied to fiat currency values. The Bank’s paper explores the regulation of “systemic payment system operators” that utilize stablecoins, while the FCA is examining similar rules. The deadline for public and industry feedback on these papers is February 6, 2024.
The Prudential Regulatory Authority (PRA) has also issued a “Dear CEO letter,” which outlines its expectations for risk management from digital money issuers. Additionally, a “cross-authority roadmap paper” addressing financial innovation has been published. These initiatives reflect the global trend towards digital assets. For example, the Swiss National Bank is preparing to conduct a trial of its first cryptocurrency with six commercial banks. The Bank of England’s framework emphasizes the importance of secure payment innovations, particularly in the retail sector.
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