In a move that could reshape the balance of authority within the UK’s financial regulatory landscape, a recently published 40-page consultation response from His Majesty’s Treasury suggests a potential tilt in favor of the Bank of England (BoE) over the Financial Conduct Authority (FCA).
In 2022, the government initiated a consultation called “Payments Regulation and the Systemic Perimeter.” It aimed to gather feedback from the industry on how to reshape the Bank of England’s payments perimeter in response to the changing risks associated with financial stability.
The completed document includes rules to regulate “systemically important stablecoins.” An important detail is that the government plans for the BoE and the FCA to have shared responsibility for overseeing stablecoins.
However, a notable provision grants the BoE the authority to block the FCA from acting against stablecoin providers. Additionally, the Prudential Regulation Authority would gain the capability to prevent the FCA from specific actions if they pose potential threats to financial stability.
The response outlines that most respondents acknowledged the necessity for BoE’s primary oversight of future payment entities with systemic significance. Yet, there were calls for clarity regarding the extent of its regulatory reach.
BoE Governor Andrew Bailey, in July, expressed skepticism about the status of cryptocurrencies and stablecoins as money, asserting that they do not meet fundamental criteria for singleness and settlement finality. He proposed the creation of an alternative called “enhanced digital money.”
The consultation response, released on August 7, reflects the UK government’s deliberations on reshaping the regulatory framework to accommodate the rapidly changing financial landscape and the emergence of new digital payment mechanisms. The potential shift of regulatory power toward the Bank of England underscores the government’s commitment to adapt and assert effective control over the evolving financial ecosystem.
