The Bank of England has released stablecoin regulations that will take effect next year.
“Stablecoins have the potential to be used by many people in the UK for everyday payments,” the paper reads.
The BOE will regulate systemic stablecoins, while the FCA will govern the broader crypto market, and stablecoin issuers will need prior permission before circulating stablecoins in or from the country.
The proposed framework is part of the United Kingdom’s aim to become a crypto hub, which is one of the goals set by crypto-friendly Prime Minister Rishi Sunak.
U.K. Embraces Stablecoins as ‘Valid Form of Payment’
London to Mint an NFT and Start Sandbox for Crypto
The BOE will focus on regulating stablecoins backed by the British pound.
In a letter, the Prudential Regulations Authority (PRA), the UK’s banking regulator, has asserted that contagion risks will be lower for stablecoins used in systemic payment systems regulated by the BOE than for other regulated stablecoins captured by the FCA’s regime.
The paper also states that stablecoin issuers may keep revenue from “interest and return from the backing assets,” which are expected to be protected as client assets.
The UK’s proposed rules for stablecoins and digital assets are similar to the moves made by the European Union and Japan, while the US crypto industry continues to grapple with a regulatory quagmire.