The United Kingdom’s finance minister has presented today to the House of Commons a new regulation called the Financial Services and Markets Bill as part of the country’s latest effort to get rid of the rules established by the European Union that delimited how this industry worked before Brexit.
“Through the introduction of this Bill, we are repealing hundreds of pieces of burdensome EU regulations and seizing on the benefits of Brexit to ensure the financial sector works in the interests of British people and businesses”, Chancellor of the Exchequer Nadhim Zahawi stated.
One of the sections in the bill regulates the issuance and marketing of “digital settlement assets”, also known as stablecoins, first defining them as digital representations of value or rights, whether they are cryptographically secured or not, that can be used to fulfill financial obligations, transferred, stored, traded, or used to support the recording or storage of data.
2009 Banking Act Amended to Incorporate Stablecoin Regulations
As per the bill, Her Majesty’s Treasury department will be in charge of drafting all regulations pertaining to the payment systems, issuers, and services providers of digital settlement assets (DSA).
However, the department will work alongside other institutions within the country’s financial system including the Financial Conduct Authority (FCA), Bank of England, and the Payment Systems Regulator when drafting legislation and rules for these instruments.
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Moreover, the bill proposes various amendments to the 2009 Banking Act associated with digital settlement assets including changes to the characteristics that define a DSA service provider. It also introduces definitions for what a DSA exchange is.
To approve the operations of a DSA service provider within the country, the Treasury will consider if the entity is not a threat to the stability of the country’s financial system and if any disruption in its business may have serious negative consequences on the country’s interests.
Bank of England Will Set the Rules for DSA Providers
As per the bill, the Bank of England will be in charge of establishing the rules that will regulate how DSA service providers function. Meanwhile, the FCA will be permitted to weigh in on regulations and actions that seek to foster the proper function of these entities except under specific circumstances such as those that may threaten to destabilize the UK’s financial system.
The Bank of England is also designated by the bill as the entity that will be creating the specific policies that will regulate how DSA providers will function in consultation with the FCA following the approval of the bill.
As per the official website of the UK Parliament, the Financial Services and Markets Bill is currently undergoing its first reading in the House of Commons and it still has a long way to go before it can receive Royal Assent.
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“To ensure the UK remains at the forefront of new technologies and innovations, the Bill will enable certain types of stablecoins to be regulated as a form of payment in the UK”, stated Chancellor Zawahi in regards to the provisions concerning this segment of the crypto market.
He added: “In fostering these new innovations, the Bill will also enable the creation of Financial Markets Infrastructure Sandboxes – allowing firms to test the use of new technologies and practices in financial markets, increasing efficiency, transparency and resilience of new products”.
Governments Rush to Create Rules as Crypto Winter Wreaks Havoc
Governments across the world have been rushing to create and enforce an appropriate regulatory framework for the thriving crypto ecosystem to protect investors from the collapse of fraudulent or poorly administered projects.
Prominent examples of failed stablecoin projects include Terra’s flagship token UST, which suffered a de-pegging in May this year after the algorithm that was supposedly designed to maintain the token pegged to the US dollar failed to accomplish its mission.
Investors across the world experienced billions of dollars as a result of this event and the implosion of the ecosystem’s native token LUNA.
Even though investigations are on course in various jurisdictions to find out if the developing team intentionally defrauded the investment community, little has been done by regulators and authorities due to the absence of specific rules applicable to the firms that offer these kinds of products and services to consumers.
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