Stablecoins will be regulated in the UK in a major move towards crypto asset oversight, with plans to consult on wider crypto regulation later in 2022.
The UK’s Financial Services and Markets Bill was presented to Parliament today and widens the UK’s approach to crypto regulation, allowing for stablecoins to be considered as a form of payment.
“The Bill brings stablecoins, a type of cryptoasset, into the scope of regulation when used as a form of payment, paving their way for use in the UK as a recognised form of payment,” HM Treasury’s explanatory notes on the Bill said.
“Stablecoins which reference their value in relation to fiat currencies can be seen as more akin to traditional payment instruments, than other types of cryptoassets such as those used primarily as a means of investment (for example, Bitcoin).”
The UK government will launch a consultation later in 2022 on regulating wider cryptocurrencies like Bitcoin.
HM Treasury previously launched a consultation and call for evidence on the UK’s regulatory approach to cryptoassets in January 2021 and earlier this year laid out plans for the UK to become “a global hub for cryptoasset technology and investment.”
The Bill seeks to improve the competitiveness of the UK’s and enable growth and investment in the country, HM Treasury said. It repeals hundreds of pieces of EU retained law to “enable a coherent, agile and internationally respected regime that works in the interests of the British people.”
“Bringing stablecoins into the scope of regulation is a significant milestone. It is the first time that the UK licensing regime will specifically cater for a type of cryptoasset,” Harry Eddis, Global Co-Head of Fintech at Linklaters, said.
“Some crypto businesses must already apply AML rules but the Bill goes one step further by requiring issuers of stablecoins used as a means of payment to seek a licence from the FCA.”
The Bill also allows for the creation of Financial Markets Infrastructure Sandboxes, which will let firms test new technology and practices in temporary pilot schemes.
“The most transformative part of the Bill could be the creation of a new sandbox to be run by the Bank of England and FCA. It aims to provide a safe space for industry players to explore using blockchain technology to transform how markets work,” Eddis said.