The UK is developing new regulations for stablecoins and the wider cryptocurrency market, aiming to enhance financial stability and consumer protection while promoting innovation.
The Bank of England (BOE), in partnership with the Financial Conduct Authority (FCA), is launching a plan to regulate the market for stablecoins – cryptocurrencies that are typically pegged to stable assets such as sterling. The move comes after the UK government shared its own rules governing digital currencies.
By early 2024, the Bank of England will Start regulating stablecoins This is crucial for the payments system, while the FCA will handle the rest of the cryptocurrency market. The decision is part of a larger drive under British Prime Minister Rishi Sunak to become a key player in the cryptocurrency world.
The Bank of England is focusing on stablecoins because they believe they are less volatile for the financial system when used in large payment systems than other digital currencies. The FCA said any company wanting to offer stablecoins in the UK would first need to obtain approval.
An interesting point in the UK plan is that it would allow stablecoin companies to make money from the interest or other returns earned on the assets backing their currencies.
However, this may raise some eyebrows as companies may profit if interest rates rise, while consumers would not see these benefits – regulators are aware this could be seen as unfair.
By setting these rules, the UK is aligning itself with other countries such as the EU and Japan, which already have similar rules in place. This shows a gap with the United States, which has yet to develop a clear set of regulations for stablecoins and the broader crypto market.