The UK government has released an update about its intentions to regulate fiat-backed stablecoins. These stablecoins are digital currencies backed by traditional currencies like the British pound or the US dollar.
The UK government plans to introduce new laws in 2024 that will give the Financial Conduct Authority (FCA) the power to regulate these stablecoins. This is a big change in how digital currencies are supervised.
The government wants local companies authorized by the FCA to ensure that overseas stablecoins meet UK standards. This is meant to make sure stablecoin operators follow the rules.
The new rules will only apply to fiat-backed stablecoins, not other types like algorithm-based stablecoins. The government thinks these other stablecoins should be treated the same as regular cryptocurrencies.
For regular stablecoins, the FCA can require the issuers to keep all the money that backs the stablecoin in a special trust. This trust will have rules, including what happens if the issuer goes out of business.
The foundation for these rules comes from the Financial Services and Markets Act (FCMA) 2023, a law that was passed in June 2023.
This law gives the government, the Bank of England, and the FCA the power to regulate cryptocurrencies, including stablecoins.