Stablecoins are a type of cryptocurrency that aim to maintain a stable value by being pegged to another asset, such as a fiat currency or a commodity.
Stablecoins have been growing in popularity and use, especially as a means of payment and remittance.
However, they also pose potential risks to financial stability, consumer protection, and market integrity.
To address these risks, the United Kingdom government has proposed some measures for regulating the so-called “systemically important stablecoins”, which are stablecoins that could have a significant impact on the UK’s payment system or economy.
The government published its response to a consultation process on August 7, 2023, outlining its vision for a new regulatory framework for stablecoins.
The Role of the Bank of England and the Financial Conduct Authority
The government’s proposal involves giving more power to the Bank of England (BoE), the central bank of the country, in overseeing and supervising stablecoins.
The BoE would be responsible for ensuring that systemically important stablecoins meet high standards of prudential regulation, operational resilience, governance, and risk management.
The Financial Conduct Authority (FCA), the principal financial regulator in the UK, would also play a role in regulating stablecoins, especially in relation to consumer protection, market conduct, and competition.
The FCA would be able to apply its existing rules and powers to stablecoin providers, as well as new rules tailored to the specific features and risks of stablecoins.
However, the BoE would have the authority to prevent the FCA from taking any action that could jeopardize financial stability.
Similarly, the Prudential Regulation Authority (PRA), which is part of the BoE and regulates banks and other financial institutions, would be able to veto any FCA action that could harm the safety and soundness of systemically important stablecoins.
The government’s response states that most respondents agreed with the need for BoE primacy in regulating systemically important stablecoins, but some also asked for more clarity on the limits and scope of its power.
The Future of Digital Money in the UK
The government’s proposal is part of its broader strategy to support innovation and competition in the UK’s payment system, while ensuring financial stability and consumer protection.
The government also intends to review and update the existing legislation on payment services and electronic money, as well as explore the potential benefits and challenges of introducing a central bank digital currency (CBDC) in the UK.
In July 2023, Andrew Bailey, the governor of the BoE, expressed his skepticism about cryptocurrencies and stablecoins as forms of money.
He argued that they fail to meet the basic criteria of singleness and settlement finality, which are essential for a reliable and efficient payment system.
He suggested that instead of relying on private digital currencies, the UK should develop “enhanced digital money” that is backed by public authorities and meets high standards of regulation.
100 Happy New Month Of October 2023 Wishes, Messages, Prayers and Quotes
Nigeria@63: Tinubu to address Nigerians on Sunday
Polish opposition leader Donald Tusk seeks to boost his election chances with a rally in Warsaw
How a Church Bus Was Hijacked by Gunmen in Ondo State
Nigerian Tourism Minister Lola Ade-John Poisoned in Abuja Battles for Life
AKMODEL Homes And Properties To Launch Mega Double Estate
Breaking! Sam Larry In Police Net Over Mohbad’s Death
AlphaSense: The AI Platform That Powers Business Intelligence and Search
Mohbad Gave His Life For Others To Rise – Favour Benson
Fraud Uncovered: Explosive Details of c Muhammad Nami’s Alleged N11 Billion Suspicious Payment Post-Dismissal
How Nigeria Became a Hotspot for Organised Crime
Video: Naira Marley Requests Police Safety Assurance for Return to Nigeria
Tinubu’s Certificate Scandal: US Judge Exposes His Shocking Secrets
Supreme Court Fire Has No Impact On Presidential Election Petitions
Niger’s Junta Accuses U.N. Chief of Siding with France and ECOWAS, See Why