UK Announces 2024 Fiat–Backed Stablecoin Regulation

31 Oct 2023 by Rory Kejzerko 4 min read

In an effort to bring crypto matters into the crosshairs of traditional financial service regulation, the UK government has issued plans for new 2024-bound crypto rules.The legislation isn’t touted to be of the blanketing accord however, as the new regulations will only relate to fiat-backed stablecoins.

In this article we’ll take you through what the new regulations mean in practice, as well as provide a brief synopsis of the UK’s crypto developments over the past year or so.

Crypto Stablecoins in the UK

Per the announcement, the issuance and/or custody of stablecoins backed by fiat currencies in the UK will now be regulated under existing 2001-incepted rules designed for financial services. Such development will also be accompanied by further rules for ensuring that digital payments can fail safely and without impacting the entire financial system.

When it comes to the launch of these new frameworks, they’re touted to be rolled-out via phased introductions next year.

And when it comes to other stablecoin matters - such as those of the algorithmic variety - these will be legislated further along the line, with the government planning to implement new lending and trading regulations for the assets that’ll fall under the purview of the Financial Conduct Authority (FCA).

Other Notable Updates From the Announcement

The regulation-passing comes after months of complaints that the UK government has been dilly-dallying on providing regulatory frameworks for crypto assets (a problem that we can assume persists across all national (centralised) governments, irrespective of the matter at hand).

Further, if we’re going to assume fully truthfulness and transparency here, the legislation will be enforced in an effort to make the UK a more proficient destination for those involved in crypto antics.

In turn, this may see the region climb the table in terms of the world’s Top 10 Crypto Hubs - something that was explicitly put forwards by Treasury Minister Andrew Griffith when stating that the new frameworks would see the UK become an ‘obvious choice’ for crypto businesses wanting to start and/or scale.

When it comes to slightly different - and often ridiculed - subject of NFTs, the announcement stated that unique blockchain-residing assets - which are sometimes more akin to collectibles or artwork - “should not be subject to financial services regulation”. On the flip side, those that aren’t necessarily unique, nor released in scarcity, may still fall under future financial services rules.

Moving forwards, the FCA will soon convene to conjure-up a new authorisation regime for crypto companies in the region, whilst the government at large plans to formulate equivalent measures for overseas crypto entities looking to open UK branches.

When it comes to the extensive list of other DeFi tools, the announcement brushed them to the side (for now) by mentioning that it won’t be looking to ‘prematurely’ regulate this area of the cryptosphere just yet.

Crypto in the UK

The new fiat-back stablecoin regulatory frameworks come over two years in the waiting, as CBDC-bullish Prime Minister Rishi Sunak - then finance minister - first set out policies for making the UK a crypto haven back in April 2022.

It also comes 8 months after the UK government’s Treasury (i.e. its financial arm) published a crypto consultation that lasted from February to April 2023. Additionally, the UK Parliament also passed the Financial Services and Markets Act 2023 in June, which now means that crypto matters are treated as regulated activities.

Whilst certainly bullish for many a British crypto bull - as now they can operate within a much more-defined regulatory landscape - the UK parliament still homes several crypto cynics. These include members of the House of Commons' Treasury Committee, in whom previously argued that regulating the likes of Bitcoin (BTC) and Ethereum (ETH) may usher UK crypto traders into a false sense of security. Additionally, some parliamentary members have called for crypto matters to be treated like gambling - a proposal that the government later rejected.

More recently, October-enforced rules relating to crypto promotions in the UK caused the likes of ByBit, PayPal, and Luno to suspend certain services in the region. More specifically, these updated rules related to the requirement for firms to provide clear risk labels and implement system changes, starting from October 8th.

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