Today the UK published its Financial Services and Markets Bill, which repeals a number of EU laws. The bill covers several topics, including stablecoins and the Financial Market Infrastructure (FMI) Sandbox, which could be used for DLT security token trials.
Instead of incorporating detailed rules, the bill aims to be ‘agile,’ giving extensive rule-making authority to regulators.
The UK’s HM Treasury has these powers for both stablecoins and the FMI Sandbox. This step is taken when rule-making by regulators such as the SEC is being questioned in the United States.
Rather than using the term stablecoins, the legislation covers digital settlement assets, which is defined broadly as being used for settlement, transferred or stored electronically, and which may include distributed ledger technology (DLT). The Treasury can also alter the definition without requiring new legislation.
It can make regulations that apply to stablecoin service providers that include the issuer, custodians, exchanges, and any other person that provides services or supports the transfer of money. This would include wallet providers.
The Treasury can also unilaterally recognize an organization as a service provider if it views the company’s operations as a threat to financial stability or having a severe negative impact on UK business interests.
While the main rule-making authority sits with the Treasury, much of the stablecoin legislation updates the Banking Act to append stablecoin service providers to references to payment service providers. The Bank of England and FCA generally have oversight and enforcement power over payment systems and e-money, respectively.
Additionally, today the Treasury published a payments consultation about broadening the regulatory perimeter for systemic payment systems to include more actors in the payments chain.
Meanwhile, the UK introduced a central bank Omnibus account, which is ideal for wholesale stablecoin providers. As a result, Fnality, the settlement company backed by 16 major financial institutions is planning to launch in October.