UK FCA opens consultation on stablecoin and crypto custody rules, seeking public input on the proposed regulatory framework.
The Financial Conduct Authority (FCA) of the United Kingdom has requested public input regarding its proposed regulations regarding cryptocurrency custody and stablecoins.
UK FCA declared in a May 28 request for comment that its regulatory proposals are “the most recent milestone on the path to crypto regulation.”
The proposed regulations are derived from industry feedback and previous roundtable discussions.
According to David Geale, the UK FCA’s executive director of payments and digital finance, the organization’s objective is to foster innovation while simultaneously guaranteeing market trust:
“At the FCA, we have long supported innovation that benefits consumers and markets. At present, crypto is largely unregulated in the UK. We want to strike a balance in support of a sector that enables innovation and is underpinned by market integrity and trust.”
The UK FCA also stated that it will collaborate with the UK’s central bank to oversee stablecoins.
The Bank of England will publish a complementary consultation paper later this year for stablecoins that anticipate operating at a systemic scale, according to Deputy Governor Sarah Breeden of the Bank of England.
Guaranteeing Stability Of Stablecoins
The UK FCA stated that its regulations are designed to guarantee that the value of regulated stablecoins remains stable.
The regulator said that consumers must be adequately apprised of the management of the assets that serve as collateral.
Additionally, it was advised that stablecoin issuers designate independent third-party custodians to manage reserve assets:
“We propose to require issuers to provide holders with the right to redeem qualifying stablecoins at par value with the reference currency, irrespective of the value of the backing assets portfolio, with a payment order placed to an account in the name of the holder at the latest by the end of the business day following receipt of a valid request.“
Breeden further stated that the FCA’s proposals are a component of a more comprehensive initiative to establish the UK’s stablecoin governance.
Regulations Regarding Cryptocurrency Custody Are Imminent
The FCA also introduces new requirements for firms that provide crypto custody services in a distinct discussion paper.
The regulations are intended to guarantee that user assets are secure and accessible at all times:
“The FCA’s proposals would require firms providing crypto custody services, who have responsibility for keeping consumers’ crypto safe, to ensure they are effectively secured and can be easily accessed at any time.“
The proposed measures also seek to mitigate the likelihood and impact of crypto firms failing in both the crypto custody and stablecoin sectors.
The ongoing endeavors are also in response to the recent disclosure by UK Chancellor of the Exchequer Rachel Reeves of plans for a “comprehensive regulatory regime” to establish the country as a leader in the crypto industry.
