IRSG response – FCA's Discussion Paper DP23/4

Published 8 Feb 2024

The IRSG welcomes the opportunity to respond to the FCA's Discussion Paper DP23/4: ‘Regulating cryptoassets Phase 1: Stablecoins’, as well as the Bank of England Discussion Paper (DP): ‘Regulatory regime for systemic payment systems using stablecoins and related service providers’’.   

We set out some key considerations below.

  • The IRSG is supportive of the FCA's proposal for the establishment of a sound regulatory framework for fiat-backed stablecoins.
  • An area of concern is that the FCA's proposal does not set out in detail how the proposed regime is going to interlink with the existing framework for electronic money in the UK. There are very clear similarities between electronic money and fiat-backed stablecoins and overlaps between the respective definitions, and given the stringent requirements proposed to be applied to fiat-backed stablecoin issuers, we can see a risk that firms may prefer to rely on the electronic money framework in order to issue stablecoins
  • BoE’s proposal on systemic stablecoins is not aligned with FCA: the BoE's proposal requires the existence of a central entity to govern the safe operation of stablecoins. However, many non-systemic stablecoins may be issued on decentralised platforms. So, a stablecoin issuer that becomes designated by the BoE would have to significantly change its business model to comply with the BoE’s regime.