The UK is set for a crypto boost as the Government gears up to accept stablecoins as an official payment method.
After soliciting feedback last year, the UK government has announced fresh proposals for regulating cryptoassets that will lead to the adoption of stablecoins as a legitimate payment method. This move marks a significant step towards realizing the UK’s ambition to become a global hub for cryptoasset technology.
City minister John Glen articulated in a recent address that the government is committed to demonstrating
“that the UK is welcoming to business and particularly to crypto ventures.”
Glen’s speech conveyed a strong message from the administration, addressing earlier criticisms from the industry regarding the UK’s strict regulatory stance and the government’s perceived lack of support for innovation.
“Our vision for crypto is ambitious,” Glen added. “We will not compromise our standards, yet we will maintain a technology-neutral approach.”
Chancellor Rishi Sunak has tasked the Royal Mint with creating a digital collectible, termed a non-fungible token (NFT), slated for launch by this summer as a “symbol of the progressive mindset we are committed to.”
Chancellor of the Exchequer, Rishi Sunak, stated,
“My vision is to position the UK as a global center for cryptoasset technology, and the initiatives outlined today will help facilitate investment, innovation, and growth for firms within our borders.”
“We aim to nurture the companies of the future and the jobs they will create, right here in the UK. By effective regulation, we can instill the long-term confidence necessary for businesses to grow. This forms part of our strategy to ensure that the UK financial services sector remains at the leading edge of technology and innovation.”
Sunak further commented that regarding the financial services segment, the UK is,
“always leading in technology and innovation”
The regulation of stablecoins for payment purposes in the UK will encompass all stablecoins tied to fiat currencies, be it a single currency stablecoin or one based on a mix of currencies. However, stablecoins linked to commodities will be excluded from these new regulations, though activities involving such tokens might already be subject to regulation.
The FCA will gain authority to oversee issuers of stablecoins utilized for payments, along with other entities offering associated services such as wallet providers and custodial firms. Similar to other payment service and e-money issuers, entities providing stablecoin-based payment services must be based in the U.K. Additionally, to guarantee consumer protection, users will possess a legal claim to redeem the token’s value from either the stablecoin issuer or, where applicable, the third party interacting with the consumer.
Soon after the announcement, the Isle of Man government (IOM FSA) awarded the first license in the British Isles to Blackfridge, a company offering a GBP-pegged stablecoin. They obtained this license following their participation in the Isle of Man Financial Services Authority’s regulatory sandbox, created to facilitate product testing in real-world scenarios.
Blackfridge, having received a financial services license, is now prepared to launch its stablecoin product, called “poundtoken,” which is the first electronic money instrument constituted as a GBP-pegged stablecoin in the British Isles.
Lyle Wraxall, CEO of Digital Isle of Man, remarked,
“Blackfridge is a pioneering company, and we are delighted to have contributed to their journey as they achieve this regulatory milestone ahead of their stablecoin launch.”
“The Isle of Man embraces innovative technology and is dedicated to assisting more businesses throughout the regulatory framework, enabling them to harness this transformative technology.”
The UK’s initiative for crypto aligns with the increasing demand from firms in major financial centers like the UK and US for clearer regulations governing digital assets.
In response to regulatory scrutiny and calls from investors for greater transparency, several major stablecoin issuers have begun publishing monthly or quarterly attestation reports, where independent auditing firms validate the claims made by the issuers. Unlike complete audits, these attestations do not conduct an exhaustive review of accounts or identify potential risks.
Many prevalent stablecoin issuers, such as e-Money.com’s array of European Stablecoins, are fully collateralized, with backing from actual bank deposits and government bonds maintained at commercial banks. Consequently, they utilize a dynamic pegging strategy to align with the underlying interest rate, allowing stablecoin holders to earn interest on their assets stored in their wallets. Moreover, e-Money’s offerings adhere to comprehensive AML/CTF legislation and undergo quarterly audits by Ernst & Young.
The UK Government’s proposals include a commitment for the Royal Mint to produce an NFT, with plans for its release this summer, designed to symbolize the progressive direction the UK aims to pursue. Additionally, it was confirmed that a consultation regarding the regulation of a broader spectrum of crypto activities, including Bitcoin and Ethereum, is intended for later in 2022.
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