UK FCA requests public comments on stablecoin, crypto custody regulation

The United Kingdom’s Financial Conduct Authority (FCA) has requested public feedback on proposed regulations for stablecoins and cryptocurrency custody.

In a May 28 request for comment, the United Kingdom’s financial regulator announced that its regulatory proposals are “the latest milestone on the road to crypto regulation.” The draft rules are based on prior roundtables and industry feedback. David Geale, executive director of payments and digital finance at the FCA, said the agency aims to support innovation while ensuring 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 FCA also noted it will work with the UK’s central bank to regulate stablecoins. Bank of England Deputy Governor Sarah Breeden said, “For those stablecoins that expect to operate at systemic scale, the Bank of England will publish a complementary consultation paper later this year.”

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Ensuring stablecoins remain stable

The FCA said that its rules “aim to ensure regulated stablecoins maintain their value.” The regulator said customers must be clearly informed about how the backing assets are managed. It also recommended that stablecoin issuers appoint independent third-party custodians to hold 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 added that the FCA’s proposals are part of a broader effort to build the UK’s stablecoin regime.

Related: UK to require crypto firms to report every customer transaction

Crypto custody rules incoming

The FCA’s proposals also introduce new requirements for firms providing crypto custody services, as outlined in a separate discussion paper. The rules are designed to ensure that user assets are secure and can be accessed at any time:

“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.“

Proposed measures also aim to reduce both the likelihood and impact of crypto firms failing, both in the crypto custody and stablecoin sectors. The ongoing efforts also follow the recent revelation by UK Chancellor of the Exchequer Rachel Reeves of plans for a “comprehensive regulatory regime” aimed at making the country a crypto leader.

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