In the UK, the crypto industry is voicing concerns over proposed stablecoin regulations by the Bank of England (BoE) and the Financial Conduct Authority (FCA).
Industry advocates highlight potential misalignments in the regulatory approach, especially regarding the treatment of stablecoin issuers’ ability to earn interest on reserve assets.
The proposals, aimed at overseeing stablecoins pegged to fiat currencies or other stable assets, have drawn mixed reactions from crypto groups.
They argue that while some aspects of the proposal are positive, others, such as the limitations on earning interest and the types of assets that can back stablecoins, could hinder the growth and fairness of the stablecoin market in the UK.
Misalignments in Regulatory Approach
The crypto community is particularly concerned about the differing stances of the BoE and FCA on stablecoin issuers’ ability to earn interest.
The FCA’s proposal acknowledges stablecoin issuers’ reliance on earning interest from reserve assets, while the BoE suggests a more restrictive approach, potentially compelling issuers to adopt new business models.
Concerns Over Reserve Asset Restrictions
Both the BoE and FCA’s proposals on acceptable backing assets for stablecoins have been criticized for their potential to limit the revenue-generating capabilities of stablecoin issuers.
Industry groups argue for more flexibility in the types of assets allowed to back stablecoins, pointing out that limiting acceptable assets could deter issuers from entering the UK market.
Compensation Scheme Exclusions
The FCA’s decision not to include stablecoin providers under its Financial Services Compensation Scheme (FSCS) has also sparked debate.
While some industry representatives argue for inclusion in the FSCS, others suggest that the nascent stage of the crypto asset market makes it difficult to assess the impact and feasibility of such a measure.
As the FCA prepares to review responses to its proposals, the crypto industry awaits further developments, hoping for a regulatory framework that supports growth, innovation, and fairness in the stablecoin market.
