The Financial Conduct Authority in the United Kingdom took forward the recent stablecoin regulation plans and released a crypto asset regulation document.
The UK government recently deliberated upon stablecoin regulation in the country. The government’s paper was focused on stablecoins with fiat money as underlying assets. Moreover, the government also implied the necessary stablecoin regulation would be legally viable by 2024. The Financial Conduct Authority (FCA), continuing the momentum, has now released a discussion paper on crypto asset regulation.
According to the FCA, stablecoin regulation was important before expanding crypto regulation. The UK regulator went on to explain the various applications of both retail and wholesale stablecoins in the discussion paper. It also highlighted certain drawbacks in crypto custody that could lead to loss of assets.
It went on to explain how it plans to frame redemption rules for stablecoin issuers. The FCA mentioned that stablecoin holders could convert their stablecoins into fiat money anytime. The rule could lead to a change in rules for current stablecoin issuers.
“In line with the principle of ‘same risk, same regulatory outcome’, and to address the risks that have materialized in recent years, we have seen that the strongest level of protection of client assets would be achieved by cryptoasset exchanges establishing separate legal entities for all custody-like activities,” said the discussion paper.
Meanwhile, the Bank of England also released a paper on regulating payment systems linked to stablecoins. The central bank mainly fixated on financial stability while using such stablecoins. It proposed stablecoins based on the sterling for retail uses. On the other hand, it also specified rules for wallet providers. The paper laid down a clear distinction between e-money and regulated stablecoins, which deposit institutions must adhere to.
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