UK Establishes Framework for Stablecoin Payments as Financial Services Bill Clears House of Lords
In a significant move towards regulatory clarity, the UK’s Financial Services and Markets Bill (FSMB) has successfully passed through the House of Lords, acknowledging cryptocurrencies as regulated activities while designating stablecoins as a legitimate form of payment. Introduced in July of the previous year, this extensive bill, exceeding 340 pages, is designed to enhance regulators’ authority within the UK’s financial landscape. The bill has seen multiple amendments, including directives concerning the oversight of cryptocurrency promotions.
The regulatory strategy adopted by the UK mirrors that of the European Union (EU), which has recently rolled out the Markets in Crypto Assets (MiCA) legislation, aimed at establishing broad regulations for the cryptocurrency sector. Recognizing the expanding global footprint of crypto firms, the EU emphasizes the need for international collaboration alongside updates to MiCA. Nonetheless, the FSMB will return to the lower house of parliament for final approval and to ensure alignment with EU benchmarks.
Upon approval from both parliamentary chambers, the bill will need royal assent before it becomes law. The iterative nature of the bill suggests it may face additional exchanges between the chambers until consensus is achieved.
The House of Lords’ endorsement of the Financial Services and Markets Bill (FSMB) signifies a crucial milestone in the UK’s efforts to classify cryptocurrencies as regulated activities and regard stablecoins as an accepted payment method. This comprehensive bill, which spans over 340 pages, was rolled out with the intention of empowering regulators and utilizing post-Brexit advantages to fortify the UK’s financial system. While the initial proposal primarily targeted stablecoins under the payment regulations, subsequent amendments have broadened its scope to encompass all cryptocurrencies as regulated activities and introduce frameworks to oversee crypto promotions.
The UK government’s initiative aims to endow regulators with adequate powers to formulate comprehensive guidelines for the cryptocurrency sector. The Treasury has been actively consulting on specific rules for the sector, with Economic Secretary to the Treasury Andrew Griffith indicating that new regulations may be enacted within a year. The country’s endeavors are motivated by the intention to keep pace with the EU, which recently completed its Markets in Crypto Assets (MiCA) regulation, focusing specifically on stablecoins. The FSMB is now set to return to the House of Commons for final edits and agreement.
The Financial Services and Markets Bill has made significant headway toward potential cryptocurrency regulation in the UK. Lawmakers in the House of Lords, the upper chamber of the UK Parliament, have been championing the bill’s passage, which aims to enhance the national financial services landscape and facilitate cryptocurrency adoption. Following a third reading in the House of Lords, the bill will proceed back to the House of Commons for additional evaluation and possible revisions.
Introduced to Parliament in July 2022, the Financial Services and Markets Bill sought to maintain the UK’s financial prominence post-Brexit. The original draft of the bill granted regulatory powers over digital assets, while recent amendments from the House of Lords did not implement any specific changes for the cryptocurrency sector. The House of Lords’ passage of the bill on June 19 was part of a strategy to refine and enhance its effectiveness. Baroness Joanna Penn highlighted the bill’s goal of delivering a regulatory framework that allocates new responsibilities to regulators while ensuring transparency, democratic engagement, and accountability.
Global cryptocurrency regulations are increasingly affecting businesses’ jurisdictional decisions. Recent actions by US regulators against exchanges like Coinbase and Binance have led to legal challenges. The UK’s proactive measures in establishing stablecoin regulations and recognizing cryptocurrencies aim to provide a favorable landscape for businesses in the sector while setting clear operational guidelines.
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