The United Kingdom policymakers have in the past year worked closely with different financial institutions and other stakeholders in formulating detailed regulatory frameworks for cryptoassets and stablecoins. According to CryptoUK, the trade body formed to represent the digital asset sector in the UK, the recent publication by the HM Treasury (HMT) on the Future Financial Services Regulatory Regime for Cryptoassets that was in response to the initial consultation on Managing the Failure of Systemic Digital Settlement Assets has provided a clear overview on the fiat-backed stablecoins.
Moreover, the country has recorded a notable demand for fiat-backed stablecoins to reduce the high cost of transactions associated with traditional payments. Notably, the UK proposed measures on cryptoassets and stablecoins in response to the FTX and Alameda Research failure that impacted both retail and institutional investors.
Bank of England (BoE) and Financial Conduct Authority (FCA) on Stablecoins
With the digital Pound as the bigger picture, the Bank of England (BoE) in close collaboration with the Financial Conduct Authority (FCA) published a regulatory approach for the stablecoins market and requested the members of the public to provide their feedback. Notably, the BoE and the FCA have set up until February 6, 2024, for the members of the public and the respective crypto players to provide their opinions on the proposed stablecoins regulations.
According to Sheldon Mills, an executive director on consumers and competition at the FCA, the stablecoins have proven essential in facilitating faster and cheaper payments. Moreover, Mills added that there has been a notable demand from institutional investors seeking to offer stablecoins in a regulated manner, thus making their feedback crucial
“We look forward to continuing our engagement with the Government, our partners, and the wider crypto industry as we move forward with the Government’s first phase in developing the UK’s crypto regulation regime and beyond,” Mills noted.
Similar sentiments were echoed by Sarah Breeden, the deputy governor for financial stability at the Bank of England, who added that the stablecoins regulatory proposals aim to support safe innovation and ensure public confidence.
With over 31 million crypto users in Europe, the United Kingdom is keen to leverage the nascent blockchain technology to build on its economy. Moreover, rising inflation has caused the Central Bank to raise its interest rate amid the ongoing Russian invasion of Ukraine which has undeniably impacted the UK economic growth outlook.
Meanwhile, the ongoing crypto regulatory phase in the United Kingdom will provide a clear picture for traditional banks and web3 projects to work together. Moreover, some financial institutions led by Chase Bank UK have already banned crypto-related transactions since the mid-last months.
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