According to a recent announcement, the British government could consider restructuring of the power system which would also affect the regulation of the crypto industry. The government might make a decision in favour of the Bank of England’s (BoE) authority to regulate the sector.
On Monday, His Majesty’s Treasury (HM Treasury), released an extensive consultation response hinting towards the news. Reportedly, the authorities could rebalance the power between the Bank of England (BoE) and the country’s principal financial regulator, the Financial Conduct Authority (FCA), in the former’s favor.
In the 40-page long consultation response, the government stressed on evolving the existing structure to accommodate the innovation. The consultation was launched under the headline “Payments Regulation and the Systemic Perimeter” last year to get market proposals on reforming the BoE payments perimeter, given the evolution of financial stability risks.
The final report highlights some measures for regulating what it calls as the “systemically important stablecoins.” It is important to note that the main takeaway is the government’s intention to secure the co-supervision over stablecoins as a joint venture of both the BoE and the FCA.
However, the BoE would be given the power to prevent the FCA from taking action in relation to a stablecoin provider, and the Prudential Regulation Authority would also get the ability to keep the FCA away from a specified action “if it were to give rise to financial stability concerns.”
As specified in the document, most respondents were open to the need for BoE primacy to supervise future systemically recognized payment entities. However, some respondents demanded clarity on the limitations of its power.
It is important to note that while the UK government has been intending to embrace crypto under the leadership of prime minister Rishi Sunak, the regulators haven’t shown a similar stance. On one hand, the FCA continues to crack down on the industry especially the crypto ATMs, whereas the BoE executives have often been found to criticising crypto assets.
In July, BoE Governor Andrew Bailey stated that both cryptocurrencies and stablecoins fail basic tests of singleness and settlement finality and hence should not be considered money. Instead, he proposed to develop “enhanced digital money.”
Simultaneously, on May 17, a panel of British lawmakers opted for regulating the UK crypto market similar to gambling in a House of Commons Committee report. However, last month, the UK Treasury expressed disagreement with the proposal bringing a major relief.
Amid the increasing adoption and crimes, the UK Treasury did promise a timely and sensible regulation in February. To which, The Financial Services and Markets Bill 2023, recently approved by King Charles III, is an important law that enables the UK government to take charge of the rules governing financial services.
One significant aspect of this bill is the inclusion of crypto assets and stablecoins, which will now be subject to regulation. However, it is important to note that UK’s overall speediness towards the process of regulation is worth appreciation and a source of hope for the industry.