It's Blast Off for UK Stablecoins
It's Crypto Blast Off for the UK as Government plans to adopt Stablecoins as a recognised form of payment.
Following the call for evidence last year, the U.K. government has now confirmed new proposals for the regulation of cryptoassets which will see the UK Government move to adopt stablecoins as a recognised form of payment, accelerating the UK's plan to make the UK a global cryptoasset technology hub.
City minister John Glen said in a speech that the government was determined to show
“the UK is open for business and open for crypto businesses”.
The speech from John Glen marked the decisive message from the government in support of cryptocurrency businesses setting up shop in Britain, after criticism from the industry that the UK’s stringent regulatory approach and indifference from the government was throttling innovation.
“We see enormous potential in crypto,” Glen said. “We aren’t going to lower our standards, but we are going to sustain our technological neutral approach.”
He said chancellor Rishi Sunak had commissioned the Royal Mint to issue a digital collectible, known as a non-fungible token (NFT), by the summer as “an emblem of the forward looking approach we are determined to take”.
Chancellor of the Exchequer, Rishi Sunak said,
“It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country."
“We want to see the businesses of tomorrow, and the jobs they create, here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term. This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation.”
Sunak added that when it comes to the financial services sector the U.K. is,
“always at the forefront of technology and innovation”
The UK regulation of stablecoins used for payment will cover all stablecoins that reference fiat currencies, including a single currency stablecoin or stablecoin based on a basket of currencies. Stablecoins that reference commodities will thus be excluded from the new rules, although activities concerning such stablecoins may well already be regulated.
The FCA will have powers to regulate issuers of stablecoins for payments as well as other entities providing related services, including wallet providers and firms providing custody services. As with other entities providing payment services and e-money issuance, stablecoin-based payment service entities will need to be established in the U.K. to provide these services in the U.K. Notably, to ensure customer protection, consumers will have a legal claim to redeem the value of the token against either the stablecoin issuer or, where appropriate, the third party facing the consumer.
Shortly following the anouncement, the Isle of Man government (IOM FSA) awarded the first license in the British Isles to Blackfridge a GBP-pegged stablecoin business. They secured the license after a stint in the Isle of Man Financial Services Authority’s regulatory sandbox, which was established to allow products to be tested in a live environment.
Blackfridge, who have been granted a financial services licence to Blackfridge to undertake payment services and issue electronic money are now set to launch its stablecoin product, called “poundtoken”, the first e-money instrument constituted as a GBP-pegged stablecoin issued in the British Isles.
Lyle Wraxall, cheif executive, Digital Isle of Man commented,
"Blackfridge is a cutting-edge business, and we’re pleased to have played a part in their journey as they reach this regulatory milestone ahead of the launch of their stablecoin.'
"The Island welcomes innovative technology and is focused on supporting more businesses through the regulatory process, giving them the ability to best use this transformative technology."
The UK’s crypto push comes as firms operating in financial hubs such as the UK and US are ratcheting up pressure on governments, regulators and lawmakers to offer clearer rules and regulations on digital assets.
In response to regulatory attention and investor demands for transparency, some major Stablecoin issuers have been issuing monthly or quarterly attestation reports, where third-party auditing firms verify the information provided by the issuers. Different from audits, the firms don’t thoroughly inspect the accounts and identify risks in an attestation.
Many existing stablecoin issuers like e-Money.com's suite of European Stablecoins are fully collateralised, backed with actual bank deposits and government bonds held at commercial banks. As such they utilise a dynamic peg that tracks the underlying interest rate, meaning that stablecoin holders benefit from accrued interest on their assets even when just sitting in a user’s wallet. In addition, e-Money’s services operate in full compliance with AML/CTF legislation undergoing a quarterly audit by Ernst & Young.
The UK Government announced in the proposals is a plan for the Royal Mint to create an NFT. Set to launch this summer, it will be designed to serve as an emblem of the forward-looking approach the UK is determined to take and confirmed that it intends to consult later in 2022 on regulating a wider set of crypto activities including Bitcoin and Ethereum.
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