The majority of nations, institutions, and regulatory bodies in various countries are attempting to establish a legal framework before approving a spot Bitcoin ETF. As financial giants have previously predicted once ETF applications receive approval, the overall crypto market will experience a significant surge. Therefore, they aim to finish all the necessary regulations before approval for the ETF.
UK government to regulate fiat-backed stablecoins
Recently, on October 30, 2023, the United Kingdom government published a report on its plan to regulate fiat-backed stablecoins. The main objective of it is to make it easier for these stablecoins to be used in the UK’s payment systems while ensuring they are properly supervised.
The United Kingdom government has revealed its plans to regulate fiat-backed stablecoins, with legislation set to be introduced in 2024. The proposed regulations will bring fiat-backed stablecoins under the supervision of the Financial Conduct Authority (FCA) and authorize local companies to ensure these coins meet UK standards.
Non-fiat-backed stablecoins, including algorithmic ones, will not be allowed in regulated payment chains. Although not outright banned, they will be classified as “unregulated” and subject to requirements similar to unbacked crypto assets.
Also Read: UK House of Lords nears approval for a bill targeting illicit cryptocurrency usage
FCA authority over standard stablecoins
Under the proposed regulations, the FCA will have the authority to require that stablecoin issuers hold reserve funds in a statutory trust. The terms of this trust, including redemption responsibilities in case of the firm’s failure, will be outlined in the FCA’s rules.
The regulations find their basis in the Financial Services and Markets Act, passed in June 2023. This legislation, known as FCMA 2023, grants powers to the Treasury, the Bank of England, and the FCA to regulate cryptocurrencies and stablecoins. These measures aim to provide clarity and security within the crypto industry and reflect the growing importance of digital assets in the financial world.