The United Kingdom government recently updated its plans to supervise fiat-backed stablecoins. The document, which was released on October 30th, aims to support and govern the use of fiat-backed stablecoins in local payment systems. According to the document, there are plans to present specific policies to the UK Parliament in 2024, delegating oversight of fiat-backed stablecoins to the Financial Conduct Authority (FCA). Regulating stablecoins Notably, the UK Treasury is considering designating local businesses as payment organizers, as authorized by the FCA, with the responsibility of ensuring that foreign stablecoins meet local standards. Non-fiat-backed stablecoins, such as algorithmic stablecoins, will not be accepted in regulated payment networks. Instead of outright prohibition, the document states that these transactions will remain unregulated. Furthermore, the Treasury regards them as subject to the same requirements as unbacked crypto assets. In the case of standard stablecoins, the FCA will be given the authority to require stablecoin issuers to keep all reserve funds in a legal trust. The terms of the trust will be outlined in a specific set of guidelines provided by the FCA, including redemption obligations if the company experiences financial difficulties. In such a case, stablecoin issuers in the United Kingdom will be subject to procedures outlined in the Insolvency Act of 1986. Trust is key The Financial Services and Markets Act, which is the overarching framework for all types of cryptocurrency, was passed in the House of Lords in June 2023. The document frequently refers to the FCMA 2023 bill, which grants the Treasury, the Bank of England, and the FCA the authority to regulate cryptocurrencies and stablecoins, specifically. In any case, there would need to be a certain level of trust established between UK regulators and local crypto-oriented businesses, something which has been lacking for quite a while now. As cryptocurrencies and stablecoins steadily become more popular, the United Kingdom would have to implement the previously mentioned policies as soon as possible so as to not get left behind.
