development of uk
In the UK, the regulatory approach continues to evolve. The UK Treasury (HMT) initially supported the idea that stablecoins would be regulated through a money market fund (MMF) model. Meanwhile, the Bank of England (BoE) advocated a deposit backed (DB) model for commercial banks (a response to this was published in March 2022 in a discussion paper on new forms of digital money). The latter approach is similar to the backing model used by e-money companies, but requires enhanced safeguards and additional prudential conditions.
The Financial Policy Committee (FPC) raised concerns about the DB model in its March 2022 Focus on Financial Stability report, stating that it poses an unacceptable risk to financial stability in the event of a run. suggested that it was a possibility. Instead, the FPC has proposed a high-quality liquid asset (HQLA) alternative in which “systemic stablecoin issuance will likely need to be fully backed by high-quality, highly liquid assets.” Suggested. The report also recommends:
Where there is liquidity risk in the underlying assets, central banks should consider providing access to central bank lending facilities. The underlying assets should be held in a way that protects against failure of the issuer and other important parts of the stablecoin arrangement (wallet, asset custodian, etc.). ) Additional capital requirements may be required to reduce market risk Supervisors must be able to ensure that coins are fully backed at all times, including preventing unbacked issuance
The April 2022 response to HMT’s consultation on the regulatory approach to cryptoassets and stablecoins (PDF 445KB) demonstrates alignment with this proposed HQLA model and suggests this may be the chosen route going forward. It shows that there is a gender. As part of our response, HMT:
The government will focus on bringing certain “payments” stablecoins (those that refer to fiat currencies, either a single currency or a basket of currencies) into the regulatory sphere as a first step in legislative reform. confirmed. These include amendments to the Electronic Money Regulations 2011, the Payment Services Regulations 2017, Part 5 of the Banking Act 2009 and the Financial Services (Banking Reform) Act 2013. We have confirmed the following original proposal: Establish FCA authorization and oversight regime for stablecoin issuers and other entities Facilitate stablecoin activities (e.g. wallet providers, custody providers) – Relaxed requirements for small businesses; (in line with regulations) certain exemptions are allowed. Establishes enhanced requirements for systematized stablecoins (which will allow the BoE to limit certain stablecoins (i.e. algorithmic stablecoins, or potentially linked to non-fiat assets) requests for proposals from stablecoin issuers, or where appropriate consumer-facing entities (e.g. wallets), to ensure that the stablecoin guarantees par value and convertibility into fiat currency. , proposed a legal claim against the customer.
Initial consultations determined that stablecoins did not require a resolution regime or deposit guarantee system, but following the BoE’s DP and FPC reports, HMT has now decided to reduce the risks associated with stablecoin failures. We believe that appropriate backstop arrangements are needed to manage this. HMT published a public consultation (PDF 271KB) in May, proposing the application of a revised Financial Market Infrastructure Special Administration Regime (FMI SAR).
The Spring Queen’s Speech (PDF 406KB) formally introduced the Financial Services Bill, which is expected to introduce key legislation for stablecoin regulation, based on proposals from HMT and the BoE. The final framework that will be applied will likely be subject to further consultation between the BOE and the FCA, pending the HMT legislative process.
The bill is also expected to provide secondary powers (PDF 305KB) that will allow HMT to more quickly address consumer risks posed by other crypto assets (such as unbacked exchange tokens). I am. Further consultation on this broader set of crypto assets is expected in the second half of 2022.
