New UK Treasury Minister Proposes New Regulations for Stablecoins

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New UK Treasury Minister Proposes New Regulations for Stablecoins
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UK Chancellor of the Exchequer Nadhim Zahawi laid out plans to regulate stablecoins in the Financial Services and Markets Act.

The Bill, introduced in Parliament on 20 July 2022, authorizes the Bank of England to limit the influence of the Financial Conduct Authority in regulating payment systems that use digital settlement assets or digital settlement asset service providers, provided that such action will help due to financial instability and adversely affect UK businesses

Rishi Sunak, who is open to digital assets with former city government minister John Glen after back-and-forth clashes with Boris Johnson over taxes and spending After Rishi Sunak resigned, Zahawi took over the HM Treasury. Zahavi’s top priorities will be to reduce the tax bills paid by Britons and address the cost of living crisis.

Sunak has lobbied for the U.K. to become a “crypto center” and even commissioned the Royal Mint to create a non-fungible token to represent the U.K.’s push for crypto assets. As such, his resignation leaves a question mark on how the UK will foray into digital assets.

Phemex

The bill is part of the answer.

Nuts and Bolts

The new bill defines a digital settlement asset service provider (DSA) as a person involved in a payment service that uses digital assets as a settlement layer or protects settlement assets and any associated cryptographic keys. If the Bank of England does not fully operate DSA, the Treasury reserves the right to appoint DSA as an Approved Service Provider. In the process, the Treasury must be careful not to make designations that could jeopardize the UK’s financial stability. The Treasury must also carefully consider the value of the services provided by the DSA and its relationship to payment systems that use digital assets as settlement instruments.

It clarifies digital settlement asset exchange providers as those who exchange fiat currency for digital currency and vice versa.

The Bank of England reserves the right to request DSA’s operating rules, the rules of any entity doing business with DSA, notice of any changes to the rules and that DSA may not change the rules without BoE approval.

Banks must, in consultation with the FCA, issue a policy statement on their oversight of payment systems using digital asset settlements and digital asset service providers.

UK Treasury seeks industry input

A Treasury meeting log published on July 14, 2022, shows that the department met with Binance, Paxos, Coinbase, Goldman Sachs, a16z, Kingsway Capital and Circle in early 2022 to discuss crypto assets.

Following the TerraUSD stablecoin crash in May 2022, the UK Treasury published a proposal to limit the impact of the stablecoin crash.

The bill must pass the upper house and parliament for approval.

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