Bank of England Set to Introduce Stablecoin Regulations, Aligning with U.S. Trends

Bank of England Set to Introduce Stablecoin Regulations, Aligning with U.S. Trends

The Bank of England (BOE) is set to unveil its highly anticipated regulatory framework for stablecoins. This initiative aims to keep pace with developments in digital asset regulation in the United States, as reported by Bloomberg.

Key Takeaways:

The Bank of England will reveal its stablecoin regulatory framework on November 10, seeking to align with U.S. advancements.
The regulations will primarily address "systemic" stablecoins, while smaller ones will remain under a lighter regulatory regime by the Financial Conduct Authority (FCA).
A dual-tier system with temporary holding limits is designed to protect banks and encourage innovation in digital payments.

Deputy Governor Sarah Breeden refuted claims that the UK is lagging behind the U.S., emphasizing to Bloomberg that the new regulations would be implemented "just as quickly as the U.S."

Breeden confirmed to Reuters that the BOE will publish its formal consultation on stablecoin regulation on November 10.

UK's Dual-Tier Stablecoin Framework: Balancing Innovation and Stability

The forthcoming regulations will initially focus on "systemic" stablecoins that are projected to have a major role in payment systems, while smaller stablecoins will be regulated more lightly by the FCA.

This dual approach aims to strike a balance between fostering innovation and maintaining financial stability as the use of tokenized money grows.

Bloomberg reports that the BOE's plan includes temporary limitations on stablecoin holdings: up to £20,000 ($26,000) for individuals and £10 million for businesses.

Breeden noted that these stricter limits are a response to the UK’s bank-dependent mortgage market, which could be at risk if there is a sudden shift of deposits into stablecoins.

"Our goal is to ensure that our framework is established as expeditiously as the U.S.," Breeden stated.

This initiative comes in response to mounting pressure for the UK to remain competitive in the regulation of digital assets.

Recently, the government revealed its intention to appoint a "digital markets champion" to spearhead efforts in blockchain modernization across wholesale finance.

Additionally, the FCA lifted its four-year suspension on crypto exchange-traded notes (ETNs), extending access to these products to a wider audience beyond just professional investors.

The upcoming regulatory framework is a significant step for the UK in its ambition to become a leader in responsible crypto innovation and regulatory transparency.

UK Government to Appoint ‘Digital Markets Champion’ to Facilitate Blockchain Integration in Finance

In related news, the UK government is planning to appoint a "digital markets champion" to expedite the transition to blockchain-based financial systems, according to Economic Secretary to the Treasury Lucy Rigby.

This new position will oversee private sector efforts to tokenize wholesale financial instruments and ensure that such innovations conform to the country’s regulatory landscape.

At the Digital Assets Week conference in London, Rigby also unveiled plans for the Dematerialisation Market Action Taskforce, a new entity dedicated to transitioning from paper-based share certificates to digital records, aimed at improving market efficiency.

These efforts are part of the UK’s Wholesale Financial Markets Digital Strategy, which details plans for issuing blockchain-based sovereign debt, termed “digital gilts,” under the DIGIT framework.

Additionally, last month, HM Revenue & Customs (HMRC) increased its scrutiny of the crypto sector by sending out 65,000 "nudge letters" to investors suspected of underreporting or evading taxes on digital assets, a number that has more than doubled from the previous year's figures.

Data obtained through a Freedom of Information Act request by accounting firm UHY Hacker Young reveals a 134% increase in such warning notices.