British Regulators Relegate Crypto To The Basement With Stablecoins Under Fire

Zinger Key Points
  • Prudential Regulations Authority urges banks to manage "contagion" risks from stablecoins.
  • Upcoming legislation to address fiat-backed stablecoins, integrating digital assets with traditional finance.

Financial regulators are scrutinizing stablecoins tied to the British pound, citing concerns about their potential impact on the stability of the financial system.

Authorities outlined their approach to managing risks associated with these digital assets, which would fall under the oversight of the Financial Conduct Authority (FCA). The announcement aligns with broader discussions on digital assets, like those anticipated at the upcoming Benzinga's Future of Digital Assets conference on Nov. 14.

The event is expected to address various facets of the digital currency landscape, which now includes the regulatory perspectives and actions of major financial institutions.

In a statement released by the Bank of England (BOE), it is indicated that the focus on pound-pegged stablecoins stems from their perceived likelihood of becoming widely adopted for payment purposes.

"The discussion paper represents an exploratory phase in developing the new regime. After receiving and considering feedback from the industry on these initial proposals, the Bank will consult on its final proposed regime," the BOE remarked.

The BOE is set to regulate these "systemic stablecoins" along with their issuers.

Also Read: EXCLUSIVE - Bankman-Fried Trial Outcome Casts Positive Light On Blockchain Integrity, Says Wormhole Exec

These plans also reveal that new legislation concerning fiat-backed stablecoins is expected to be put forward at the beginning of the next year.

This regulatory initiative was further expanded upon in a separate discussion paper from the FCA and a letter from the Prudential Regulations Authority (PRA) addressed to deposit-taking entities.

The PRA highlighted the need for these institutions to shield themselves from potential "contagion" risks and emphasized that the protections that traditional deposit takers enjoy are not the same as those for users of stablecoins.

"Contagion risks will be lower for stablecoins used in systemic payment systems regulated by the Bank, than for e-money or other regulated stablecoins captured by the FCA’s regime," the PRA's letter detailed.

The FCA's discussion paper made it clear that stablecoin issuers will be required to obtain authorization before circulating fiat-backed stablecoins within or from the U.K., signifying a significant step towards the formal integration of stablecoins into the country's financial oversight framework.

Read Next: Is Bitcoin On Track For A Santa Claus Rally? Here's What Matrixport Is Predicting

Industry titans BlackRockDTCCOCCState StreetSociété GénéraleHederaCitiBMONorthern TrustCitibankAmazonS&P GlobalGoogleInvesco, and Moody’s will join our November 13 Fintech Deal Day and November 14 Future of Digital Assets. Secure a spot here to join them!

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: CryptocurrencyNewsTop StoriesMarketsBank Of Englandcrypto regulationsDigital AssetsFCAStablecoinsUK
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!