UK Government Updates Regulatory Plans For Fiat-Based Stablecoins

His Majesty's Treasury plans to introduce a special stablecoin law. (photo: twitter @hmtreasury)

JAKARTA - The UK government has published an update to regulatory plans for fiat-based stablecoins. Documents published on October 30 aim to facilitate and regulate the use of fiat-based stablecoins in the UK payment chain.

According to the document, His Majesty's Treasury plans to introduce special laws to parliament by 2024, bringing regulations for fiat-based stablecoins under the mandate of the Financial Conduct Authority (FCA).

Treasury is considering making local companies an "arrangers of payment," authorized by the FCA, responsible for ensuring that stablecoins from abroad meet local standards.

Non-fiat-based stablecoins, including algorithm-based stablecoins, will not be allowed in regulated payment chains. However, the document does not impose a direct ban but warns that "this transaction will remain unregulated." In addition, Treasury considers them subject to the same requirements as unsupported crypto assets.

As for standard stablecoins, the FCA will be authorized to demand that stablecoin publishers store all reserve funds in trust under law. The term trust will be regulated in FCA regulations, including the obligation to redeem in cases of company failure. In this latest scenario, the UK stablecoin issuer will face procedures under the 1986 Insolvency Act.

The main framework for all types of cryptocurrencies, namely the Financial Services and Markets Act, was passed in the House of Lords' top room of the British parliament in June 2023. This Treasury document repeatedly refers to the law, naming it FCMA 2023. In FCMA 2023, Treasury, Bank of England, and FCA got their authority to regulate crypto and in particular stablecoins.