The UK government outlines the FCA’s role in stablecoin regulation.

HM Treasury today published a policy update for the country's crypto regulation. In it, the UK government outlined the FCA regime in stablecoin regulation. The Bank of England (BoE) and the Payment Systems Regulator (PSR) will also have a role.

The UK government has published a policy update outlining the regulation of fiat-backed stablecoins in the country.

In terms of regulating activities around Statcoins, HM Treasury focuses on two areas – their use in payment chains and custody “in or from the UK”. The latter will be regardless of the fiat-backed stablecoin's uses, whether for payments, as a settlement asset or as a store of value.

FCA, BoE's role in stablecoin regulation

In a publication released on Monday, HM Treasury outlines the regulatory regimes expected by the Financial Conduct Authority (FCA), the Bank of England (BoE) and the Payment Systems Regulator (PSR).

“The regulatory landscape brings in some (fiat-backed) stablecoins at the Bank of England, the Financial Conduct Authority (FCA) and the Payment System Regulator (PSR), which aim to reduce consumer harm and behavior in general. Arising prudential and financial stability risks,” the document reads in part.

The government expects the FCA, the BoE and the PSR to work within the framework of the overall stable coin regulation, in line with the legal objectives, with regulators and a transparent approach.

While HM Treasury's secondary legislation brought stablecoins within the FCA's regulatory jurisdiction through Parliament, the onus is on the FCA and the BoE to oversee the organization as a system.

“Where the FCA is authorized by a fiat-backed stablecoin company known as the HMM Treasury system and subject to supervision by the Bank of England, the Government expects the Bank of England to act and be able to act as the lead prudential regulator.” Under section 5 of the Banking Act 2009 to regulate such entity, the firm continues to be governed by the FCA for conduct,” the document says.

UK legislation on crypto is set for 2024, after the Financial Services and Markets Act 2023 is passed in June, allowing crypto to become a regulated activity. The latest policy reform seems to prepare various government agencies and regulators for this.