In this Consultation Paper (CP) we are consulting on proposed rules and guidance for the activities of issuing a qualifying stablecoin and safeguarding qualifying cryptoassets, including qualifying stablecoins. This CP follows Discussion Paper (DP23/4) on our proposed approach to regulating stablecoins, which may be used for payments.
Our proposals have been guided by our statutory objectives and 2025-30 Strategy. They are intended to:
- Support growth: we want to enable cryptoasset firms to develop and innovate in a safe and sustainable way, designing a proportionate regime that allows firms that set up in the UK to compete internationally and support the growth of the UK in medium to long term.
- Help consumers: we want consumers to receive appropriate levels of protection. We want to ensure consumers can stay informed and have access to products that meet their needs and offer fair value.
- Fight crime: our proposals are intended to support firms to act as a strong line of defence against financial crime. They should focus on designing crime out of activities relating to cryptoassets. Firms should look to minimise the use of cryptoassets for fraud, money laundering, terrorist and proliferation financing or any other criminal activities.
- Be a smarter regulator: in developing our regime we are making sure that our regulation is purposeful. We have considered where we can rely on the Consumer Duty instead of developing additional requirements.
Our proposed rules and guidance cover:
- Requirements for qualifying stablecoin issuers.
- Requirements for qualifying cryptoasset custodians.
Under our proposals, qualifying stablecoin issuers will be required to:
- back qualifying stablecoins with secure, liquid assets in a statutory trust for qualifying stablecoin holders. These backing assets should be held with a third party custodian who is not in the issuer’s group.
- offer redemption of qualifying stablecoins in exchange for money to all holders. Payment orders to transfer redeemed funds to qualifying stablecoin holders should be placed at the latest by the end of the next business day following receipt of a redemption request.
- clearly disclose their policy for redemption and the composition of backing assets to consumers.
When engaging with a qualifying cryptoasset custodian, clients should expect that their assets will be protected. Clients should expect their qualifying cryptoassets back at any time they ask for them, as well as those assets returned as quickly and as whole as possible, if the custodian enters an insolvency process. Under our proposed rules in this CP, custodians of qualifying cryptoassets will be required to:
- segregate client cryptoassets from their own
- hold those qualifying cryptoassets on behalf of clients in a trust
- have accurate books and records of clients’ cryptoassets holdings
- have adequate controls and governance to protect clients’ cryptoassets holdings
Who needs to read this document:
- firms that issue, or are seeking to issue, fiat-referenced stablecoins in the UK
- firms that wish to make use of qualifying stablecoins within wider activities (eg retail payments or on-and off-ramping)
- cryptoasset custodians and other firms that carry out or seek to carry out
- industry groups, law firms and trade bodies representing firms in the cryptoasset sector
- auditors providing services to cryptoasset firms
- professional advisors in the cryptoasset sector
- consumer and groups representing consumer interest.
Leave a Reply