On July 20, the Financial Services and Markets Bill was introduced in the British Parliament. The sweeping bill, which sought to preserve the UK’s leading place in the financial world after Brexit, repealed retained EU laws, reformed certain insurance laws, supported victims of financial fraud and set new targets for growth and competitiveness. The bill also regulated stablecoins.
The presence of the regulation of stablecoins in the bill was confirmed the day before in the programmatic speech delivered by the Minister of Finance, Nadhim Zahawi. Although the regulation of stablecoins was planned on the bill from its inception, the fate of that regulation had become a matter of concern to some observers after the recent turmoil in the cryptocurrency markets and the resignation of government members in favor of cryptocurrencies in early July, including Treasury Economic Secretary John Glen and Zahawi’s predecessor Rishi Sunak.
2. Embracing cryptoasset technology to establish a stablecoin regime and enable the use of a wider set of payment methods in the UK. pic.twitter.com/OByPNFQJh0
— HM Treasury (@hmtreasury) July 20, 2022
The bill expands the Banking Act of 2009 and the Financial Services (Banking Reform) Act of 2013 to include “digital settlement assets” (DSAs) and authorizes the Treasury to regulate DSAs, payments made with DSA, DSA service providers and DSA insolvency agreements. These regulations will be developed in consultation with the Financial Conduct Authority (FCA), the Bank of England and other regulators, as appropriate.
The Bank of England’s deputy governor for financial stability, Jon Cunliffe, who has a history of cynicism about cryptocurrencies, has repeatedly called for more regulation of cryptocurrencies. In a speech on July 12, he compared the current cryptocurrency regulatory framework to that of “unsafe planes,” specifically pointing to the collapse of Terra (LUNA), now Terra Classic (LUNC). The FCA registers companies that provide cryptocurrency services. Obtaining that registration has proven to be quite a challenge for numerous contenders.
Before becoming law, the bill must have two more readings in the House of Commons, as well as go through the commission and report phases, and then go through the same process in the House of Lords.
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