Today the UK’s Treasury issued a consultation paper setting out a framework for dealing with a failed stablecoin provider. The emphasis is on a systemic “digital settlement asset” rather than a stablecoin that’s small. If there’s a collapse, the goal is to give the Bank of England the ultimate say, rather than purely the administrators.
Usually when an organization fails, the insolvency procedures focus on returning the maximum amount of money to the creditors. However, in the case of a financial market infrastructure (FMI), the continuity of a payment system often trumps the interests of the creditors. For this reason, there are Special Administration Regimes (SARs) for when a payment system fails.
There are two SARS in the UK, one for financial market infrastructures, the FMI SAR, which was designed for some of the UK’s major systems, such as the operation of Faster Payments.
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