Bank of England Remains Focused on Systemic Stablecoin Regime
The UK central bank has released a consultation response on systemic stablecoins, suggesting that it remains committed to a systemic stablecoin regime.
On Tuesday, the Bank of England (BoE) released the "Payments Regulation and the Systemic Perimeter" framework, which agreed on co-supervision arrangements by the BoE and Financial Conduct Authority (FCA).
The BoE will lead on prudential matters, ensuring the stability of financial systems. The FCA will lead on conduct.
"In cases of insolvency, systemically important PSPs or EMIs would migrate from coverage under the Payments and Electronic Money SAR overseen by the FCA and into the Financial Market Infrastructure SAR overseen by the Bank," the consultation document said.
"As for views concerning FMI SAR (the regime) primacy in cases of insolvency of future systemic payments entities, this was widely well received."
The BoE's Prudential Regulation Authority and Payment Systems Regulator, as well as some other regulatory bodies, would also be involved in the collaborative approach.
The consultation document recommended that regulators clearly outline their collaborative efforts in a memorandum, specifying the specific roles played by each regulatory body within the framework.
This would give the BoE the authority to prevent the FCA from taking action against institutions identified as systemic, particularly if it raises concerns about financial stability.
Last year, the United Kingdom released a series of consultations that outlined its intention to subject systemic stablecoins to existing regulations, with the added objective of ensuring the return of customer funds and maintaining smooth operations.
UK's New Law to Regulate Cryptocurrencies
Back in June, the UK passed legislation to regulate cryptocurrencies and stablecoins as part of its broader financial regulatory reforms post-Brexit.
The new law, dubbed the Financial Services and Markets bill, has granted regulators the authority to establish a tailored framework for the digital asset sector, supporting crypto’s "safe adoption in the UK."
The bill also granted the BoE the power to establish a regime for systemic stablecoins.
The BoE has announced its plans to release the rules governing systemic stablecoins later in 2023.
At the time, UK Economic Secretary to the Treasury, Andrew Griffith, hailed the legislation, calling it a “landmark piece of legislation” that gives control over the “financial services rulebook” back to the national government.
"By repealing old EU laws set in Brussels it will unlock billions in investment, cash that can unlock innovation and grow the economy," he said, adding:
“2023 is proving to be a banner year for reforming our financial services.”