The Financial Conduct Authority (FCA) of the United Kingdom is soliciting further input on its forthcoming stablecoin regulatory framework, as announced on Wednesday. In a statement, the FCA expressed its intention to explore the addition of a specific stablecoin focus to its innovation services in the near future. The proposed regulations are designed to ensure the stability of stablecoins and reduce the likelihood of stablecoin and crypto custody companies failing.
Regulatory scrutiny of stablecoins has intensified following the 2022 collapse of the algorithmic stablecoin TerraUSD, which resulted in significant investor losses. Since 2023, the FCA has been developing its crypto regulatory framework, including the publication of a discussion paper outlining proposals for a stablecoin regime.
The regulator has intensified its efforts to regulate the sector through a series of discussion papers and is collaborating with the UK government to establish new legislation granting regulators the necessary powers to implement their digital asset sector regimes. The FCA will work in conjunction with the Bank of England to regulate stablecoins, with the Bank of England slated to publish a complementary consultation paper later this year, addressing industry feedback on permitting returns on backing assets, according to Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England.