UK Core Financial Markets Implications Spotted by Bank of England Over Stablecoin Risks
Crypto Daily Dish: Regulators Eye Stablecoins in the UK
☝️ Hey there, crypto fan! Today, let's dive into the world of stablecoins and the latest developments in the UK.
Bank of England Warns on Stablecoin Risks
The Financial Policy Committee (FPC) of the Bank of England has released a report detailing the potential risks associated with stablecoins. With the market for these asset-pegged cryptocurrencies growing significantly, the FPC has identified possible problems with inadequately backed stablecoins that could lead to "fire-sales" of backing assets.
The body is alarmed by the potential dominance of stablecoins backed by foreign currencies, citing concerns about currency substitution and the impact on specific economies. Cross-border payments involving stablecoins could also increase counterparty credit risk, making it harder to control increased volatility in cross-border flows.
UK Aims to Establish Comprehensive Stablecoin Regime
As the global crypto landscape continues to evolve, the UK is making strides in establishing a regulatory framework for stablecoins. HM Treasury (HMT) has released a draft statutory instrument, the Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025. This legislation aims to create new regulated activities for cryptoasset trading platforms and stablecoin issuance.
Crypto firms with UK customers will also face regulatory standards in areas such as transparency, consumer protection, and operational resilience, mirroring those in conventional finance. The Financial Conduct Authority (FCA) will be responsible for supervising these new activities once the legislation is approved.
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Enrichment Data:
This article covers the Bank of England's latest report regarding the potential risks associated with stablecoins, along with the UK's ongoing efforts to establish a comprehensive regulatory framework for stablecoins as part of a broader cryptoasset regime. The new legislation will require FCA supervision for fiat-backed stablecoin issuance and will establish regulatory standards.
- Despite the growth in the stablecoin market, regulating bodies, like the FPC of the Bank of England, warn about possible risks, such as "fire-sales" of backing assets and increasing counterparty credit risk due to cross-border payments.
- In an effort to prepare for the evolving cryptocurrency landscape, the UK is working on a regulatory framework for stablecoins, as outlined in the draft statutory instrument, the Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025.
- This new legislation proposes creating new regulated activities for cryptoasset trading platforms and stablecoin issuance, with regulatory standards on transparency, consumer protection, and operational resilience, similar to conventional finance.
- As the regulation progresses in the UK, crypto firms dealing with UK customers are expected to abide by these standards once the legislation is approved, under the supervision of the Financial Conduct Authority (FCA).
- Cryptocurrency and altcoin stories continue to emerge, as Bitcoin Seoul 2025 brings together industry leaders, FLOKI partners with Rice Robotics to launch an AI companion robot, and STEMP collaborates with the Argentina Football Association to release NFTs featuring historic soccer memorabilia and player signatures.
