Stablecoin regulation13 Oct 2024 10:31
Does anyone know when phase 1 and phase 2 of the uk stablecoin regulation completes? Was phase 1 in May, phase 2 Jan 2025?? Hard to clarify online.
I assume that there isn't going to be a DSS entry but they are waiting in the innovations pathway for regulation.
United Kingdom (UK)
In November 2023, the UK’s financial regulatory authorities—the Bank of England, the Financial Conduct Authority (FCA), and the Prudential Regulation Authorit—unveiled proposals for the first phase of a comprehensive regulatory framework for digital assets. This initial phase of the framework addresses fiat-backed stablecoins, defined as those intended to hold a stable value by reference to one or more specific fiat currencies.[22]
Under this proposed framework, any entity issuing or providing custodial services for fiat-backed stablecoins within the UK must obtain authorization from the FCA and adhere to stringent regulatory standards. These standards include segregating client assets, maintaining robust governance controls, and maintaining meticulous records. Additionally, issuers would be required to back the issued stablecoins with stable and liquid reserves to enable swift customer redemptions, and they would be prohibited from offering interest on these stablecoins.
The framework also categorizes stablecoin-based payments into two types: hybrid and pure. Hybrid transactions involve using a regulated stablecoin to enter or exit a transaction, while pure transactions are conducted entirely on-chain with a single stablecoin. Both types of transactions are subject to at least some aspects of the existing Payment Service Regulations, which will be expanded to encompass features unique to stablecoin transactions. This inclusion ensures that stablecoin users enjoy protections similar to those afforded to traditional payment service users, such as specific disclosures, execution time limits, and a structured process for resolving complaints.[23]
Phase 1 of the framework does not cover commodity-backed or algorithmic stablecoins, which are slated for consideration under Phase 2 regulations. Additionally, the UK is assessing how to appropriately regulate foreign stablecoins that participate in UK payment systems. The current proposals require that a UK-authorized firm approve such stablecoins as meeting standards equivalent to regulated (i.e., UK-issued) stablecoins. This can be contrasted with the EU approach of requiring stablecoins offered to the EU public to be issued by EU-incorporated entities and subject to local reserve requirements.
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