The Government is consulting on proposed amendments to the FMI Special Administration Regime to enable the management of a failure of a “systemic digital settlement asset firm” – including stablecoin. The consultation follows the Government’s commitment to a staged and proportionate approach to crypto asset regulation, which will initially focus on stablecoins as the asset most likely to develop into a widespread means of payment. Following the recent upheaval in the markets, the need for regulation has become more apparent. So, in line with its commitment to bring forward changes to legislation to bring stablecoin-based arrangements under the current e-money and payments regulatory regimes, it is now taking forward the best way to manage risks related to the failure of a systemic stablecoin firm that either acts as a system itself or is a service provider of systemic importance. The Government is planning to broaden the definition of “payment system” to include arrangements that facilitate or control the transfer of digital settlement assets, thus bringing them within BoE regulation under the Banking Act 2009.
Treasury is now proposing, in advance of any work that might be needed on a bespoke regime for systemic DSA firms, that an amendment to the FMI SAR would be an appropriate vehicle to address the risks of their failure.
Comments are requested by 2 August 2022.