United Kingdom’s top financial watchdog, the Bank of England (BOE) on Monday proposed a framework to regulate stablecoins. The move comes in with a bid to keep up with the rapid evolution of currencies with blockchain. The BOE aims to bolster confidence in money and payments stressing the crucial role of regulatory oversight in strengthening financial stability.
BOE keeping pace with stablecoin evolution
According to the Bank of England, the published discussion paper mentioned that the stablecoins sterling-denominated stablecoins are considered to be the most likely digital settlement assets to be used widely for payments. However, the proposed framework is divided into two broad sections. Part one aims to ensure the safety of money and payment within the scope of the regime, while part two focuses on the proposed requirements of the regime.
BOE stated that the latest paper around building safer ecosystems around digital assets was published alongside a discussion paper from the Financial Conduct Authority (FCA) on their regulatory approach to stablecoin issuers and custodians. It added that a letter from the country’s Prudential Regulation Authority (PRA) was also taken into consideration.
The demand for tougher global regulations around the digital assets market has grown due to the major collapse of Sam Bankman-Fried (SBF) founded crypto exchange FTX. Meanwhile, SBF was convicted of fraud and money laundering by a New York jury. SBF is reportedly facing a maximum sentence of around 115 years in prison.
Collaborative regulatory approach
UK’s financial watchdog suggested that with these joint publications, regulators are trying to provide clarity as to which regulatory regime each form of money and money-like instrument falls under. It added that the published discussion paper represents an exploratory phase in developing the new regime. However, the bank will consult its final proposed regime after receiving and considering feedback from the industry based on the initial proposals.
As reported, under the UK treasury’s proposal, Stablecoins will be regulated under the same umbrella. It is due to the existing rules for traditional payment service providers known as payment services regulations. It added that the issuance and custody of fiat-backed stablecoins where the coin is issued from the United Kingdom will come under the regulatory perimeter of the vital Financial Services and Markets Act.
The treasury earlier issued an advisory stating that certain stablecoins have the potential to become a widespread means of retail payment. It can drive consumer choice and efficiency.
As per the data, stablecoins hold a cumulative market capitalization of over $125 billion with a 24 hour trading volume of $32.4 billion. Tether’s USD (USDT) is the biggest stablecoin in the league with a staggering market cap of more than $85 billion.
