The Financial Services and Markets Bill was introduced into the UK Parliament on July 20. The comprehensive bill, which was meant to preserve the UK’s leading place in the financial world post-Brexit, repealed retained EU laws, reformed certain insurance laws, supported victims of financial fraud and established new growth and competitiveness objectives. The bill also regulated stablecoins.
The presence of stablecoin regulation in the bill was confirmed the evening before in the programmatic speech delivered by Chancellor of the Exchequer Nadhim Zahawi. Although stablecoin regulation was intended to be part of the bill from its inception, the fate of that regulation had become a matter of concern for some observers after the recent upheaval in crypto markets and the departure of pro-crypto members of the government earlier in July, which included Economic Secretary to the Treasury John Glen and Zahawi’s predecessor Rishi Sunak.
2. Embracing cryptoasset technology to establish a stablecoin regime and enable the use of a wider set of payment methods in the UK. pic.twitter.com/OByPNFQJh0
— HM Treasury (@hmtreasury) July 20, 2022
The bill extended the Banking Act of 2009 and Financial Services (Banking Reform) Act of 2013 to cover “digital settlement assets” (DSA) and authorized the Treasury to regulate DSA, payments made with DSA, DSA service providers and DSA insolvency arrangements. Those regulations will be made in consultation with the Financial Conduct Authority (FCA), Bank of England and other regulators as appropriate.
Bank of England deputy governor for financial stability Jon Cunliffe, who has a record of crypto cynicism, has repeatedly called for greater crypto regulation. He compared the current cryptocurrency regulatory framework to “unsafe aeroplanes” in a speech July 12, pointing specifically to the collapse of Terra (LUNA) — now called Terra Classic (LUNC). The FCA registers firms providing crypto services. Obtaining that registration has proven to be a challenge for numerous contenders.
Before it can become law, the bill must have two more readings in the House of Commons, as well as going through committee and report stages, and then go through the same process in the House of Lords.