New UK rules will regulate stablecoins, restricting interest income for consumers.
The Bank of England (BOE) and the Financial Conduct Authority (FCA) have published proposals to regulate stablecoins in the UK. This move comes as part of the government's push to make the country a global hub for digital currencies.
The BOE plans to supervise widely used stablecoins. Their oversight will target stablecoins pegged to the British pound as they will likely become prominent payment solutions.
The FCA will regulate the broader crypto sector. Firms looking to issue fiat-backed stablecoins in the UK will need FCA approval. The regulator wants to guarantee stablecoins have adequate assets backing them and can be easily redeemed for fiat money.
Proposals from big tech companies like PayPal to issue stablecoins have increased the need for regulation globally.
The new stablecoin rules will differentiate them from bank deposits. Regulated issuers will be allowed to keep interest earned on reserve assets backing the coins. However, they cannot pay income to consumers, which the FCA admits may seem unfair given current high-interest rates.
