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The UK FCA and the Bank of England released a regulatory feedback document on stablecoins, aiming to ensure the security of future payment systems.

The FCA stressed that stablecoin issuers should act in the best interests of their customers, and the Bank of England is considering regulating payment systems.

The Bank of England warned banks to clearly label stablecoin deposits and ensure they have measures in place to combat money laundering, liquidity and terrorist financing.

The UK’s Financial Conduct Authority (FCA) and the Bank of England (Bank) have opened feedback on two papers discussing the regulation of stablecoins. The papers consider how these assets can be safely used in future payment systems on a system-wide basis.

The FCA’s paper advises stablecoin issuers to ensure “good outcomes” for their customers. The Bank of England said stablecoins could enhance digital retail payments with tighter regulation.

Central banks can oversee stablecoin issuers

Speaking about the proposal, FCA Executive Director Sheldon Mills said stablecoins could make payments cheaper and faster. That’s why the public must help refine the rules needed to make such transactions safer.

“Stablecoins have the potential to make payments faster and cheaper for everyone, which is why we want to give businesses the ability to tap into this innovation safely and securely. Hearing from others is critical to developing proportionate rules that benefit consumers and companies and achieve our goals.”

The FCA said stablecoin issuers act in the best interests of customers. The bank discussed the idea of ​​how payment systems could be regulated through the Prudential Regulation Authority, which is responsible for regulating financial services.

The bank’s document warns banks to clearly label stablecoin deposits to avoid customers confusing them with traditional deposits. Banks and other issuers should only issue stablecoins from non-deposit-taking and insolvent remote entities.

Stablecoins and traditional payments | Source: S&P Global

Banks must also take care to ensure operational resilience and take steps to combat money laundering, liquidity and terrorism financing risks. The comment period on the discussion paper closes on February 6, 2024.

Stablecoins are digital assets that track the value of government-issued currencies. Their issuers must hold one unit of fiat currency for each stablecoin issued on the market.

Cryptocurrency exchanges can sell stablecoins to customers in exchange for fiat currency. To do this, exchanges usually seek the help of third parties who operate the network to bring legal value to the blockchain.

U.S. regulators lag behind Asian peers

Several countries are in the process of developing or enacting stablecoin regulations. Following the introduction of a bill targeting crypto assets and exchanges in June, Hong Kong hopes to issue new laws targeting stablecoins and tokenized assets as the next stage of its digital asset regulation.

The Monetary Authority of Singapore finalized stablecoin regulations in August, while the European Union offers stablecoin rules in its Crypto-Asset Markets Act, which is set to be introduced next year. Jeremy Allaire, CEO of Circle, which issues a dollar-backed stablecoin, said in September that he did not think U.S. stablecoin regulations would be passed anytime soon.

Do you have anything to say about the Bank of England and FCA’s stablecoin proposals or other issues? #监管  #稳定币