Following its consultation last year, Treasury has decided it will regulate stablecoins. It plans to bring activities that issue or facilitate the use of stablecoins that are used as a means of payment within the UK regulatory perimeter, and proposes to do this mainly through amending e-money and payments legislation. This will also be the first step into what will be a wider consultation later this year on regulating a wider set of cryptoasset activities.
The Government plans:
- an amended e-money framework that will provide a consistent framework within which to regulate stablecoin issuance and the provision of wallets and custody services: it has in mind:
- developing a definition for “payment cryptoasset” or a similar term that will bring into scope any cryptographically secured digital representation of monetary value which is, among other things, stabilised by reference to one or more fiat currencies and /or is issued and used as a means of making payment transactions. This would achieve the desired effect of excluding, for example, models which stabilise their value by referencing other assets;
- applying the EMR safeguarding requirements to customer funds received in exchange for issuing a stablecoin;
- generally applying the exemptions and contents of e-money regulation to stablecoins and their issuers in the same way as they apply in respect of e-money;
- introducing a new regulated custodial activity for wallet providers, which FCA will police;
- to extend the applicability of Part 5 of the Banking Act 2009 to include stablecoin activities where the risks have the potential to be systemic; and
- to extend the scope of the Banking Reform Act to ensure relevant stablecoin-based payment systems are subject to appropriate competition regulation by the PSR.
Additionally:
- the Government is developing an FMI sandbox to support firms wanting to innovate, including by using DLT and other developing technologies; and
- later this year, there will be further consultation on cryptoasset regulation and the growth of decentralised finance.