Vida FatemiThe government has provided an update on its plans for bringing fiat-backed stablecoins into the UK’s regulatory perimeter for financial services.
This follows the January 2021 consultation on the UK regulatory approach to cryptoassets and stablecoins and the April 2022 response to the consultation, which confirmed the government’s plans to bring certain activities relating to stablecoins into the regulatory perimeter.
The response confirms that the use of fiat-backed stablecoins in payment chains will be brought within scope of the PSRs and issuance and custody of such coins where issued in or from the UK will be brought within FSMA. The Government will consult on how to allow overseas stablecoins to be used in UK payments as well as those issued in the UK – perhaps by requiring the “arranger” of the payment to be regulated.
The update sets out the government’s plan to regulate certain activities relating to fiat-backed stablecoins in phase 1 and regulate wider types of cryptoassets (such as algorithmic stablecoins and commodity-backed tokens not caught in phase 1) in phase 2. This phased approach is expected to provide optionality and flexibility for both firms undertaking phase 1 activities and those with business models more focused on phase 2-only activities. Treasury plans to place legislation before Parliament by early 2024 at the latest.