Stablecoin regulation in the UK

22 Jul 2022, 40 mins ago

What is a stablecoin?

A stablecoin is a type of cryptoasset (specifically a cryptocurrency) that is pegged to a stable reserve asset (like the USD or gold).  It is also a digital currency.  For a greater discussion on digital currencies please see Gherson’s criminal litigation, investigation and regulatory team’s series of blogs on what is a CBDC.

Are stablecoins regulated in the UK?

In a press release of 20 July 2022 HM Treasury confirmed that the Financial Services and Markets Bill (the “Bill”) had been announced in Parliament.  Although the provisions in the Bill are far-reaching, one specific aspect of interest is that the Bill will enable specific forms of stable coins to be regulated as forms of payment in the UK. 

How will stablecoins be regulated?

As things currently stand with regards to crypto-regulation, anti-money laundering rules apply to certain crypto business which will need to apply for Financial Conduct Authority (“FCA”) registration.  Indeed, there have been issues with the FCA registration process, which the team has previously written about

However, with the implementation of the new bill, issuers of specific forms of stable coins will now need to apply for FCA registration.

Are cryptoassets regulated in the UK?

As explained above, AML rules apply to certain crypto businesses (including potentially those dealing with cryptoassets such as Non-Fungible Tokens (“NFTs”)). In addition, the team has previously written a blog with regards to the regulation of NFTs.

However, the Bill could be the first step along the road to wider and more specific cryptoasset regulation. Indeed, Gherson’s team have long been arguing for the need for a bespoke UK cryptoasset regulatory regime.  Up until now, the lack of a definite regulatory framework surrounding cryptoassets has hindered their take-up on a large scale, as companies and investors were reluctant to get involved in an area where there was a lack of clear and established rules.  

In fact as far back as July 2021 Gherson’s white-collar crime and regulatory team posed the question via an article in Finextra whether it was time for a bespoke UK crypto regulation regime.  

The Bill could now be the first step in the right direction.

What does all this mean?

The Bill indicates a growing interest in reinforcing the regulation of cryptoassets in the UK.

If this trend continues, it could encourage businesses or investors who have been interested in cryptoassets, but have so far been hesitant to take the plunge.  At some point, there might even be the implementation of a wider crypto-asset regulatory regime.

How Gherson can assist

Gherson’s white-collar crime and regulatory team has recently started a series on the regulation of crypto, with the aim of advising those who work in the compliance of this sector. In addition, for those who would like advice on relevant issues, including those who have had issues with the FCA registration process, our specialist regulatory and compliance team can guide individuals and companies through the process.  

If you have any questions arising from this blog, please do not hesitate to contact us for advice, send us an e-mail, or, alternatively, follow us on TwitterFacebook, or, LinkedIn to stay-up-to-date.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2022