As part of an ongoing effort to create a regulatory framework for cryptoassets, the Bank of England is launching a consultation on its proposed regime to support the issuance of systemic stablecoins.
The U.K.’s central bank published a policy statement and draft rules for so-called “systemic” stablecoin issuers — which could pose risks to financial stability if they displace traditional money and deposits as the primary form of payments and settling transactions.
Under the U.K.’s approach, systemic stablecoins will be jointly regulated by the central bank and the U.K.’s Financial Conduct Authority (FCA), while “non-systemic” stablecoins (that are used for trading cryptoassets) would continue to be solely regulated by the FCA.
The BoE said that it will soon release a joint paper with the FCA that sets out how regulatory responsibilities for stablecoin oversight will be divided up.
In the meantime, the central bank published proposals on Monday that, it said, aim to support innovation on money and payment systems by providing prospective systemic stablecoin issuers with greater regulatory clarity.
Among other things, the proposed rules set out requirements for the assets that issuers must hold to back systemic stablecoins — along with its approach to capital requirements, safeguarding, coinholder remuneration and arrangements for dealing with a failed stablecoin. The bank also set out its plans for a liquidity facility that it’s planning to launch for systemic stablecoin issuers.
“This is a major milestone in delivering greater choice and innovation in U.K. payments,” said Sarah Breeden, deputy governor for financial stability at the BoE, in a statement.
“Innovation thrives on trust. And today we’ve set out the foundations of that trust for a new form of money — with prompt redemption, strong protections and central bank support. This is truly a world leading regime,” she added.
The proposed new regime, which follows a consultation that took place last year, includes changes to increase the maximum share of issuers’ assets that can be held in short-term government debt to 70% from 60% (with the rest required to be held in central bank deposits). It also proposes a temporary issuance limit, initially set at £40 billion, that’s designed to preserve access to credit as stablecoins gain traction.
The deadline for providing feedback on the proposals in Sept. 22.
The bank said that it aims to finalize its requirements by the end of the year, allowing regulated stablecoins to operate in the U.K. in 2027.