EU Money Maestros Warn UK About Taming Crypto Beasts: Stablecoin Regulations and Securities Under Scrutiny!
Discussion papers on stablecoin regulation and custody were released by agencies in November, shaping the UK’s approach to crypto assets.
Response deadlines for UK’s stablecoin regulation discussion papers varied, with an extension by the Bank of England to Feb. 12, while the Financial Conduct Authority’s remained Feb. 6. AFME submitted timely comments to the FCA.
The November release of discussion papers on stablecoin regulation marked the UK’s initial step towards comprehensive crypto asset oversight, tackling the topic from different agency perspectives.
The Bank of England focused on systemic payment system concerns regarding retail-focused stablecoins, while the Financial Conduct Authority’s paper explored various stablecoin use cases, emphasizing regulatory consistency based on risk.
The Financial Conduct Authority (FCA) will oversee custodianship, while the Bank of England (BOE) may impose additional requirements, particularly for off-chain transactions and Anti-Money Laundering and Know Your Customer requirements for unhosted wallets. Services deemed systemically important or essential to payment systems using stablecoins or recognized stablecoin service providers may face dual regulation.
James Kemp, AFME’s managing director of technology and operations, hailed the UK proposals as a “positive step,” although he expressed concern regarding the treatment of securities tokens.
The Financial Conduct Authority (FCA) defines securities tokens as “cryptoassets already subject to regulation.” James Kemp commented:
Security tokens […] are inherently securities and should be treated as such throughout their lifecycle. To preserve market functioning, it is important that they are not subject to the separate regulatory treatment and territorial scope for custody proposed by the FCA.
The AFME spokesman recommended that the FCA defer parts of the proposal concerning stablecoins issued abroad until international frameworks and mature markets are established overseas.
Stablecoin regulations are anticipated to be implemented in the U.K. by 2025.
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