UK Finance responds on stablecoins

UK Finance has responded to the FCA and BoE discussion papers on regulating stablecoins. It is generally supportive of the broad proposal to build upon the existing regulatory/legislative regime for stablecoins used for payments

Response to FCA discussion paper

UK Finance supports applying the principles of the CASS regime to payment stablecoins. UK Finance proposes the following changes to be made to reflect the novel functionality and risks posed by stablecoins:

  • EMRs, PSRs and CASS must be amended to fill in gaps in the existing regimes that do not yet cater for stablecoin issuers and their service providers;
  • security tokens could be captured under existing CASS rules and not be subject to any potential new custody regime for stablecoins;
  • definitional clarity is needed to outline the differences between e-money, tokenised deposits and stablecoins; and
  • any future authorisations regime should avoid duplicative applications and reduce the burden on firms participating in stablecoin products and services.

Response to BoE discussion paper

UK Finance again emphasises the need for definitional clarity on the differences between e-money, tokenised deposits and stablecoins. It also encourages BoE, when considering a wholesale regime and overseas stablecoins, to consider:

  • whether business to, as well as in, the UK should be subject to regulation in the first place;
  • use of the overseas person exclusion which provides safeguards proportionate to the activity and UK client or counterparty in its use of “with or through” and a legitimate approach; and
  • development of an equivalence regime for cryptoasset service providers who are regulated in another jurisdiction.

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