HMT Consults on Approach to Regulating Cryptoassets and Stablecoins
HM Treasury, also known as HMT, published a consultation on the broad approach to regulating cryptoassets and stablecoins in UK. It seeks views on how the UK can ensure its regulatory framework is equipped to harness the benefits of new technologies that support innovation and competition, while mitigating risks to consumers and financial stability. This consultation includes a call for evidence on investment and wholesale uses of cryptoassets and the broader use of distributed ledger technology, or DLT, in financial markets. The call for evidence seeks views on benefits and drawbacks of adopting the distributed ledger technology across financial markets, whether there are obstacles to the adoption of this technology, and the actions that government and regulators should consider in this area. This consultation closes on March 21, 2021.
In the existing legislation, a large proportion of cryptoassets fall outside or are likely to fall outside the regulatory perimeter. This means they may not be subject to the same consumer protection or safeguards found in other areas of financial services and payments. This may prevent benefits from being realized and exposes consumers to potential harm and, depending on the prevalence and value transferred, could pose financial stability and consumer risks. In light of this, HM Treasury is consulting on the broader regulatory approach to cryptoassets, including new challenges from stablecoins. The consultation reflects advice from the joint Cryptoassets Taskforce of UK, which was established in 2018 with a mandate to consider the risks and benefits posed by cryptoassets and distributed ledger technology in UK and to advise on the appropriate regulatory response.
The consultation document sets out the landscape for cryptoassets and their current status in UK regulation, outlines the proposed policy approach of the government, and sets out specific proposals with respect to cryptoassets used for payments purposes. The government proposes a staged and proportionate approach to regulation, which is sensitive to risks posed and responsive to new developments in the market. The government proposes to first introduce a regulatory regime for stable tokens used as a means of payment. This would cover firms issuing stable tokens and firms providing services in relation to them, either directly or indirectly, to consumers. The government also proposes to seek to ensure that tokens, which could be reliably used for retail or wholesale transactions, are subject to minimum requirements and protection as part of a UK authorization regime.
This document represents the first stage in the consultative process and focuses on establishing a sound regulatory environment for stablecoins, where the government judges that risks and opportunities are most urgent. The government will strategically assess new and emerging risks as this market continues to mature. Future regulation of a potentially wider set of tokens and services will be informed by this analysis, taking into consideration the views of industry, consumers, and regulators. If the proposals are adopted, HM Treasury and the relevant UK authorities will issue further consultations and guidance, including specific firm requirements.
Related Links
Comment Due Date: March 21, 2021
Keywords: Europe, UK, Banking, Securities, Cryptoassets, Stablecoins, Proportionality, Regulatory Regime, Distributed Ledger Technology, Blockchain, HM Treasury
Previous Article
FASB Clarifies Scope of Guidance on Reference Rate ReformRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
