The UK government has clarified the sharing of power between the Bank of England and the FCA for the regulation of stablecoins.
The UK Treasury has released a consultation response that sheds light on the regulation of stablecoins. According to the document, the Bank of England (BoE) could get more power in the exercise, bypassing the Financial Conduct Authority (FCA). The FCA, meanwhile, is the primary financial regulator of the United Kingdom.
The power-sharing formula between the Bank of England and the Financial Conduct Authority was explained in detail. The response by the government was for the consultation launched in 2022.
It invited market proposals for reforms in the BoE payments jurisdiction. In the latest document, the government has also clarified for making both the BoE and the FCA co-regulators.
But the Financial Conduct Authority won’t be able to cross the BoE in the case of stablecoin providers. The Prudential Regulation Authority would overpower the FCA in special cases of financial stability concerns.
Earlier, the government had suggested several reforms in the consultations for the Bank’s payment perimeter. According to the market comments and suggestions, it has now recorded its responses in the document.
It has listed multiple proposals for the co-sharing of power between the FCA and the BoE. One of them said, “The Treasury would grant itself power to make regulations to disapply existing FCA rules that were superseded by the Bank’s regime for systemic payments entities. It would also be possible for the Treasury’s power to enable transitional regulatory arrangements to apply.”
In short, the government has clearly demarcated responsibilities for regulation. The step could bode well for the crypto industry, which will receive more clarity on the regulatory framework.