The FCA DP provides further insight into HMT’s plans to amend the 2017 PSR to fully address the following payment chains:
Mixed (“hybrid”) stablecoin payments — i.e. the on-ramp to the payment chain is from a stablecoin, but is converted to fiat within the chain, and the off-ramp becomes fiat (or vice versa) Pure stablecoin payments — that is, where both the on-ramp and off-ramp of the chain are within a stablecoin, and the transfer of value takes place within the stablecoin.
This will result in the use of regulated FBS in the UK payment chain.
At least one end of the transaction (either in-store or online) takes place in the UK A UK company facilitates the transaction (regardless of whether the transaction takes place in the UK)
In a hybrid model, some elements of the transaction (such as transferring funds to a payment service provider) are already covered by the PSR. Unregulated elements (e.g. management of FBS, conversion of FBS to fiat currency) will be included within the scope of the PSR as “ancillary stablecoin payment services”.
In a pure model, no elements of the transaction are processed using traditional payment systems. As such, the FCA may require (i) direct two-way “on-chain” processing, or (ii) a way for payment providers to batch and/or net off transactions through their payment interface (i.e., using a stablecoin). We are proposing to introduce this within the PSR through the PSR. (fewer large transactions).
Payment providers (both models) fall under the existing PSR conduct rules. However, depending on the business model chosen, custodial arrangements can also occur in hybrid payments and can also occur in pure payments. In this case, the FCA proposes that the full scope of the RAO’s custody activities apply.
In any case, consumers who make payments using a regulated FSB will consequently have access to a wide range of PSR 2017 protections, including AML checks, complaint facilities and associated compensation and remedies.
