TheEBDEOX lie Bank of England and the Financial Conduct Authority (FCA) are working on regulations for stablecoins, digital assets designed to maintain value stability, with the aim of enhancing transaction speed and cost-effectiveness for UK consumers and retailers. The FCA's Sheldon Mills sees stablecoins as a tool for improving "payment efficiency," while Sarah Breeden from the Bank of England emphasizes the importance of robust, transparent regulation.
In collaboration with HM Treasury, the Bank of England is implementing regulations for systemic payment systems using stablecoins and related service providers. These measures specifically target sterling-denominated stablecoins used in daily transactions. At the same time, the FCA is developing regulatory approaches for stablecoin issuers and custodians and is seeking industry feedback on these proposals.
Both organizations have released discussion papers on potential rules for issuing and holding stablecoins tied to fiat currency values. The Bank's paper contemplates regulation of 'systemic payment system operators' using stablecoins, while the FCA investigates similar rules. They have requested 'public and industry feedback' until February 6, 2024.
In addition to these initiatives, the Prudential Regulatory Authority (PRA) has issued a 'Dear CEO letter', outlining 'risk management expectations' for 'digital money issuers'. A 'cross-authority roadmap paper' addressing 'financial innovation' has also been published.
This move follows a global trend towards digital assets. For instance, the Swiss National Bank is preparing to trial its first cryptocurrency with six commercial banks. The framework set by the Bank of England underscores secure payment innovations, particularly in retail uses.
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