The Bank of England (BOE) has granted an extension for responses to the UK's stablecoin regulatory discussion paper until the morning of February 12, extending the original deadline of February 6. However, the Financial Conduct Authority (FCA) discussion paper maintains its original deadline of February 6. The Association for Financial Markets in Europe (AFME) submitted its response to the FCA on schedule.
Released on November 6 as part of a joint publications package, the discussion papers mark the initial stages of formulating comprehensive crypto-asset regulations. While both papers address related topics, they approach the issue from distinct perspectives.
The BOE's paper primarily delves into matters concerning the utilization of GBP-backed retail stablecoins within the payment systems of the ecosystem. It discusses transfer capabilities and outlines requirements for wallet providers. On the other hand, the FCA's paper explores various use cases of stablecoins, focusing on auditing, reporting, prudential requirements, and support and custody. The principle of "same risks, same regulatory outcomes" is emphasized. The FCA also intends to regulate custodial operations, with the possibility of the BOE imposing additional requirements, particularly concerning off-chain transactions and anti-money laundering measures for non-custodial wallets. Services that may have systemic implications or utilize stablecoins or recognized stablecoin service providers for critical functions within systemic payment systems could be subject to dual regulation.
In response to the UK proposal, James Kemp, AFME's managing director of technology and operations, commended it as a positive step forward. However, he voiced concerns regarding the treatment of security tokens. According to the FCA, security tokens already fall under the regulatory purview as specified investments under the Financial Services and Markets Act 2000. Kemp stressed that security tokens essentially represent securities and should be regulated accordingly throughout their lifecycle. He emphasized the importance of maintaining market functionality and argued against subjecting security tokens to separate regulatory treatment and territorial scope as proposed by the FCA.
Additionally, the AFME representative suggested that the FCA engage in certain proposals concerning the issuance of stablecoins overseas until an international framework and more mature overseas markets emerge.
