The government has published its stance on UK stablecoin regulations, claiming only fiat-backed stablecoins would get impetus under a regulatory regime.
The UK government has continued its dedicated stance on crypto regulations. It recently made news in the crypto space with fresh guidelines for the UK stablecoin industry. While publishing a document, it shared details on fiat-backed stablecoins and its linked rules. The required legislation for fiat-backed stablecoins would be a reality in 2024, it said. Meanwhile, the Financial Conduct Authority (FCA) would be liable under the new law to regulate the UK stablecoin domain.
“As set out in the government’s consultation response, it is the government’s intention to facilitate and regulate the use of fiat-backed stablecoins in UK payment chains. This is because certain stablecoins have the potential to become a widespread means of retail payment, driving consumer choice and efficiencies,” said the document.
It went on to the details of the regulations, saying the new law would mainly focus on two aspects. Firstly, it would regulate stablecoins in payment chains. Secondly, the issuance and custody of fiat-backed stablecoins would also be monitored. The FCA would create the necessary rules for regulating the activities of stablecoins.
On the other hand, authorities would not allow other stablecoins in regulated payment chains. The government has not imposed a direct ban on such activities. But at the same time, it has mentioned their unregulated transactions.
The FCA would also have other rules for stablecoin issuers to comply with. For instance, reserve funds must be held in a statutory trust. Investors and customers of the firm would benefit since the firms would need FCA permission before the trust’s redemption. It could apply during cases of bankruptcy or failure.
The government in the United Kingdom has regularly facilitated the industry with crypto regulations and other initiatives. The latest document is a step in the same path.