The Bank of England (BoE) and the Financial Conduct Authority (FCA) have published their plans for regulating stablecoins, which are digital tokens that are pegged to the value of fiat currencies or other assets. The regulators aim to ensure that stablecoins are safe and reliable for users and the financial system, and that they comply with the existing laws and standards. However, the crypto industry has some concerns about the proposals, and has suggested some revisions and clarifications.
The crypto industry sees inconsistencies and uncertainties in the regulatory plans
The crypto industry sees inconsistencies and uncertainties in the regulatory plans, especially regarding the treatment of stablecoin issuers and their reserve assets. The FCA proposes to allow stablecoin issuers to retain the revenue derived from interest and returns from the backing assets, which is the main source of income for most issuers. The BoE, on the other hand, suggests that systemic stablecoin issuers, which are those that have a significant impact on the financial stability, should hold their reserve assets in central bank reserves, which would limit their ability to earn interest.
The crypto industry argues that this discrepancy would create an unfair and unsustainable situation for stablecoin issuers, and that it would discourage innovation and competition in the sector. The industry also points out that the BoE’s proposal would create a monopoly for the central bank, and that it would expose the reserve assets to the risk of inflation and devaluation. The industry calls for a more consistent and flexible approach, that would allow stablecoin issuers to choose from a range of high-quality and liquid assets, and to benefit from their returns.
The crypto industry also sees uncertainties in the regulatory plans, especially regarding the definition and scope of stablecoins. The FCA defines stablecoins as cryptoassets that reference the value of one or more fiat currencies, but it also acknowledges that there are other types of stablecoins, such as those that reference commodities, precious metals, or other cryptoassets. The FCA says that it will consider the regulation of these other types of stablecoins in the future, but it does not provide any clear timeline or criteria for doing so.
The crypto industry argues that this lack of clarity would create confusion and ambiguity for the market participants, and that it would hamper the development and adoption of stablecoins. The industry also warns that the FCA’s definition of stablecoins may be too narrow and restrictive, and that it may exclude some innovative and beneficial use cases, such as decentralized finance (DeFi) and cross-border payments. The industry calls for a more comprehensive and inclusive definition of stablecoins, that would cover all the different types and features of stablecoins, and that would be aligned with the international standards and best practices.
The crypto industry welcomes some aspects of the regulatory plans
The crypto industry welcomes some aspects of the regulatory plans, such as the recognition of the potential and importance of stablecoins, and the intention to foster a supportive and proportionate regulatory environment. The industry also appreciates the regulators’ efforts to consult and engage with the stakeholders, and to seek feedback and input from the public. The industry hopes that the regulators will continue to collaborate and communicate with the industry, and to consider the industry’s suggestions and concerns.
The crypto industry also supports some of the principles and objectives of the regulatory plans, such as the protection of consumers and investors, the promotion of competition and innovation, and the maintenance of financial stability and integrity. The industry agrees that stablecoins should meet the same standards and expectations as the existing payment systems and instruments, and that they should comply with the relevant laws and regulations, such as anti-money laundering, consumer protection, and data protection. The industry also acknowledges the challenges and risks that stablecoins may pose to the users and the financial system, and the need for appropriate and effective regulation and supervision.