United Kingdom: Consultation opened on Managing the Failure of Systemic Digital Settlement Asset Firms

On 31 May, the UK Treasury opened a consultation on managing the failure of systemic digital settlement asset (DSA) firms until 2 August 2022. The consultation defines DSA to include stablecoins and wider forms of digital assets used for payments and settlement. The consultation notes that the failure of DSA firms of systemic importance can be detrimental to financial stability and consumers. The consultation differentiates between the regulation of systemic DSA firms through a specific legal framework and the application of existing rules to systemic DSA firms, opting for the latter option for the time being. The Treasury thus proposes to apply the Financial Market Infrastructure Special Administration Regime (FMI SAR) to DSA firms and requests input from stakeholders. The FMI SAR is overseen by the Bank of England and focuses on ensuring the continuity of services. Certain amendments for the application to DSA firms are proposed.