Bank of England to Rescue Collapsing Stablecoin Issuers—If They’re Big Enough

1 Jun 2022

The Bank of England yesterday announced it would intervene to direct and oversee collapsing stablecoins should the British central bank decide that a stablecoin issuer “has reached systemic scale fail [sic].” 
The news came via a document prepared by the HM Treasury in response to a cryptocurrency consultation that began in January 2021 and concluded in April this year. 
The British government proposes to amend the UK’s Financial Market Infrastructure Special Administration Regime to bring crypto within the jurisdiction of the British central bank while giving the institution the reins in the event of a collapsing stablecoin.
One proposed amendment also includes broadening the legal definition of a “payment system” to include crypto, providing the central bank with regulatory powers under Part 5 of the 2009 Banking Act. 
The government clarified that the central bank will only step in during “systemic” collapses, which it defines as any “deficiencies in [a system’s] design or disruption to its operation may threaten the stability of the UK financial system or have significant consequences for businesses or other interests.”
The exact powers given to the central bank under the amended Special Administration Regime are largely unclear, though the document mentions “direction” and “oversight” and provides an example: “[The Bank of England] must approve the administrator’s proposals from the outset (and on a continuous basis) and has powers to direct the administrator to take or refrain from taking specified actions.”
The central bank will be required to consult the Financial Conduct Authority (FCA) before requesting a special administration order.

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