The Bank of England (BOE) and the Financial Conduct Authority (FCA) have announced new regulations for stablecoins and the broader cryptocurrency market in the UK. The goal is to promote financial stability and consumer protection while also encouraging innovation.
These new rules come right after the UK government released its own regulations for overseeing digital currencies. By early 2024, the BOE will start regulating stablecoins which are important for payment systems. The FCA will regulate the rest of the crypto market. This move shows the UK government under Prime Minister Rishi Sunak wants the UK to be a major player in crypto.
The BOE is focusing on stablecoins because they are seen as less risky for the financial system compared to other digital money when used for large payment systems. Any company that wants to offer stablecoins in the UK will need approval from the FCA first.
The UK’s plan to regulate stablecoins will allow companies issuing them to profit from interest earned on the assets backing the coins. This could be seen as unfair if interest rates increase, as companies would benefit while consumers don’t.
The UK is following the lead of places like the EU and Japan which already have stablecoin regulations in place. This contrasts with the US, which has yet to establish a clear framework for overseeing stablecoins and cryptocurrencies. By implementing rules, the UK is addressing a regulatory gap that still exists in America.
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