The UK Treasury has begun consultations on regulating cryptocurrencies and stablecoins. The department proposes regulating the industry in line with traditional financial services.
In the department’s published document it says that stablecoins pose the same financial stability risks as regulated payment systems. Therefore, regulation of ‘stablecoins’ is necessary. Consultations on the proposed norms are open until March 21.
“We will use a flexible, risk-based approach to regulation, built on the principle of ‘similar risks — similar regulatory outcomes’,” said UK MP John Glen.
In relation to stablecoins, authorities intend initially to introduce a regulatory regime for ‘stable tokens’ used as a means of payment.
“Regulation will cover issuers of stablecoins and firms providing related services,” the department’s representatives stressed.
Algorithmic stablecoins such as DAI from Maker remain outside the scope of the Treasury’s proposed rules. Officials say such assets may not be suitable for retail or wholesale operations. For similar reasons, security tokens are excluded from the regulatory framework.
George Morris, a partner at law firm Simmons & Simmons called proposals to regulate stablecoins “quite burdensome.” If adopted, UK exchanges listing stablecoins would have to register with the Financial Conduct Authority (FCA).
“It is clear that all this is unsustainable — imposing additional rules leads to confusion, contradictions and unnecessary obstacles,” Morris said.
HM Treasury Cryptoasset and Stablecoin Consultation by ForkLog on Scribd
The UK introduced a temporary registration regime for crypto firms, which will run until 9 July 2021.
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