United Kingdom: Published Update on Plans for the Regulation of Fiat-backed Stablecoins

On 30 October 2023, the UK Treasury published its revised plans for regulating fiat-backed stablecoins in the UK, aimed at enabling their use in payment systems. The new rules will be presented to Parliament in 2024, shifting oversight of fiat-backed stablecoins to the Financial Conduct Authority (FCA). Local firms, acting as payment arrangers under FCA authorisation, will ensure overseas stablecoins meet local standards. Non-fiat-backed stablecoins, like algorithmic stablecoins, will not be allowed in regulated payment systems. While not explicitly banned, these transactions will be considered unregulated and subject to requirements like other unbacked cryptocurrencies. For standard stablecoins, the FCA will have the power to require issuers to hold reserve funds in a statutory trust, with trust terms detailed in FCA regulations, including redemption obligations in case of issuer insolvency.