The United Kingdom government could rebalance the power between the Bank of England (BoE) and the country’s principal financial regulator, the Financial Conduct Authority (FCA), in the former’s favor, according to a 40-page consultation response published by His Majesty’s Treasury on Aug. 7.
The British government launched the consultation under the headline “Payments Regulation and the Systemic Perimeter” in 2022 to get market proposals on reforming the BoE payments perimeter, given the evolution of financial stability risks.
The final paper sets out some measures for regulating so-called “systemically important stablecoins.” The main takeaway is the government’s intention to secure the co-supervision over stablecoins as a joint venture of both the BoE and the FCA.
Related: UK Law Commission recommends ‘distinct’ legal category for crypto
However, the BoE would be given the power to prevent the FCA from taking action in relation to a stablecoin provider, and the Prudential Regulation Authority would also get the ability to keep the FCA away from a specified action “if it were to give rise to financial stability concerns.”
As the document specifies, most respondents accepted the need for BoE primacy to supervise future systemically recognized payment entities. However, some respondents demanded clarity on the limitations of its power.
In July, BoE Governor Andrew Bailey stated that both cryptocurrencies and stablecoins fail basic tests of singleness and settlement finality and hence should not be considered money. Instead, he proposed to develop “enhanced digital money.”
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