The United Kingdom government could rebalance the power between the central bank of the country, Bank of England (BoE) and the principal financial regulator, the Financial Conduct Authority (FCA), in the former’s favor. That follows from the 40-page response to the consultation process, published by His Majesty’s Treasury on August 7.
The consultation under a headline ‘Payments Regulation and the Systemic Perimeter’ was launched by the British government in 2022 to get the market proposals on reforming the BoE payments perimeter, given the evolution of financial stability risks.
The final paper sets out some measures for regulating the so-called “systemically important stablecoins”. The main takeaway is the government’s intention to secure the co-supervision over stablecoins as a joint venture of both BoE and the FCA. First time such regime was suggested in 2022’s stablecoins consultation response document.
However, the BoE would be given a power to prevent the FCA from taking action in relation to a stablecoin provider, and the Prudential Regulation Authority (PRA) would also get a power to keep the FCA away from a specified action, “if it were to give rise to financial stability concerns.”
As the document specifies, most respondents accepted the need for Bank primacy towards the supervision of future systemically recognised payments entities. However, some of them demanded clarity on the limitations of its power.
In July, Andrew Bailey, a BOE governor, stated that both cryptocurrencies and stablecoins fail basic tests of singleness and settlement finality, and hence should not be considered as money. Instead, he proposed to develop “enhanced digital money.”