#hm-treasury

➤ UK regulators are proposing to integrate tokenization and new forms of digital money into the core infrastructure of future retail payment systems, aiming for a diverse 'multi-money ecosystem'. ➤ This initiative includes exploring programmable payments and ensuring interoperability between traditional systems and tokenized assets like stablecoins and tokenized deposits. ➤ The UK's Financial Conduct Authority (FCA) is also advancing its crypto regulatory framework, with licensing windows opening soon, and the Bank of England is considering extended operating hours for settlement infrastructure to support tokenized finance.

➤ The Bank of England has released draft rules for systemic pound-backed stablecoins, aiming for finalization by end-2026 and a 2027 rollout. ➤ Key changes include a 70% allowance for interest-bearing government debt in reserves and a £40 billion temporary issuance cap, replacing earlier individual holding limits. ➤ HM Treasury will designate systemic tokens, while the FCA will oversee non-systemic ones, creating a bifurcated regulatory approach.

➤ The UK's ambition to become a crypto hub is hindered by slow regulatory progress and overlapping authorities, risking market outflow by 2027. ➤ Conflicting roles between HM Treasury, FCA, and Bank of England create operational uncertainty, potentially driving infrastructure and liquidity to faster-moving markets like the U.S. and EU. ➤ Industry concerns include lost business opportunities (e.g., Deribit) and an increased reliance on U.S. dollar-backed stablecoins, leading to a risk of dollarisation.

➤ The UK government is updating payment regulations to integrate stablecoins and tokenized deposits into the existing framework for traditional payment services. ➤ This move aims to create a unified regulatory approach for both traditional and digital forms of money, avoiding a separate 'crypto' category for stablecoins. ➤ The proposed changes will include a consultation on reforms, new FCA powers over Open Banking, and aim to reduce administrative burdens for firms offering stablecoin payment services.