The UK’s HM Treasury published the results of a consultation about payment regulation and the ‘systemic perimeter’. The recommendations are far broader than systemic stablecoins, but stablecoins were one of the triggers for change. That’s because previously an infrastructure might be considered systemic based on a particular entity category such as a bank or e-money provider. Instead, the proposals aim to move away from the entity’s form and look at the risks.
One of the proposals is to add a new category of ‘service provider’. However, regarding systemic stablecoins, the recently passed Financial Services and Markets Act 2023 (FSMA 2023) already created a new category – the digital settlement asset service provider (DSA service provider).
The Bank of England will have the power to set limits on systemic infrastructures, which made some respondents hesitant. The government emphasized this is more likely to be applied to new entrants to ensure a “new activity scales safely”. It mentions one of the intentions of limits is to address new stability risks such as those presented by stablecoins.
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