What is the compliance overview and summary for stablecoins under the UK Financial Services and Markets Act 2023?

The UK Financial Services and Markets Act 2023 introduces a legal framework to regulate stablecoins—referred to as digital settlement assets (DSAs)—and associated services. It grants regulators powers to oversee, enforce, and define future rules governing trading, custody, AML/KYC, marketing, and insolvency procedures. Full text

• Comply with future regulations for designated activities.
• Adhere to FCA rules for exchange listing and trading.
• Be subject to broad regulatory intervention and penalties.
• Follow rules for overseas entities conducting UK activities.
• Implement Bank of England safeguarding principles for custody.
• Update AML/KYC processes under amended regulations.
• Ensure marketing to UK retail clients follows restrictions.
• Comply with future insolvency rules for service providers.

What are the Eligible issuer types for stablecoins under the UK Financial Services and Markets Act 2023?

Under the UK Financial Services and Markets Act 2023, eligible stablecoin issuer types are not explicitly defined but can be specified in future regulations under the designated activities regime. Digital Settlement Asset issuers are broadly defined as any person.

• Allow regulations to define issuers based on designated activity.
• Define Digital Settlement Asset issuers broadly as a person.
• Do not further specify particular entity categories for issuers.

What rules govern Exchange-listing-conditions and trading venue requirements for stablecoins under the UK Financial Services and Markets Act 2023?

Under the Act, the Financial Conduct Authority (FCA) can set rules for recognised UK investment exchanges, including conditions for listing or trading financial instruments. This may include stablecoins when traded on these venues. Source

• Empower FCA to establish rules for exchanges listing financial instruments, potentially including stablecoins.

What Supervisory Intervention Powers and Regulatory Actions Do Regulators Have Under the UK Financial Services and Markets Act 2023?

Regulators such as the FCA and Bank of England are granted sweeping powers to manage financial stability and enforce compliance. These include halting activities, suspending rules, issuing penalties, and intervening in third-party services.

• Prohibit designated activities partially or entirely.
• Suspend rules made for designated activities.
• Impose requirements on persons or groups.
• Establish enforcement measures including penalties.
• Direct critical third parties to act or abstain.
• Issue public statements on contraventions.
• Prohibit or condition critical third-party services.

What is the Local presence requirement or establishment requirement under the UK Financial Services and Markets Act 2023?

The Act allows regulations to apply to overseas entities conducting UK activities, adapt UK rules for foreign infrastructures, and recognize equivalent foreign regimes. This affects foreign stablecoin entities engaging with the UK market.

• Apply regulations to overseas entities conducting designated activities in the UK.
• Adapt UK rules for overseas financial market infrastructures (FMI) authorized by Treasury.
• Implement mutual recognition agreements with foreign countries for equivalent regimes.
• Recognize equivalent non-UK securitisations under certain conditions.
• Exclude overseas investment exchanges from senior manager requirements.

What is the White Paper or Prospectus Requirement for Stablecoins under the UK Financial Services and Markets Act 2023?

While the Act revokes prior EU prospectus regulations, it does not specify new requirements for stablecoin white papers or prospectuses. Modifications may be tested in Financial Market Infrastructure (FMI) sandboxes.

What are the requirements for Tokenized Asset Reserve Segregation and Custody under the UK Financial Services and Markets Act 2023?

Specific requirements regarding reserve segregation and custody for tokenized assets were not provided in the source text.

What Custody Safeguards For Intermediaries And Asset Safeguarding Rules Apply Under The UK Financial Services and Markets Act 2023?

The Bank of England may define principles for safeguarding digital settlement assets, including private keys. The Treasury can designate crypto custody services for FCA oversight.

• Define DSA service providers safeguarding digital settlement assets.
• Empower Bank of England to publish guiding principles.
• Authorize Bank of England to issue codes of practice.
• Extend oversight to connected service providers.
• Grant Treasury power to designate cryptoasset custody.
• Empower FCA to make rules for designated activities.

What are the Attestation and Audit Frequency requirements for stablecoins under the UK Financial Services and Markets Act 2023?

No specific attestation or audit frequency rules for stablecoins were identified in the source documentation.

What are the Issuer Anti-Money Laundering and KYC obligations under the UK Financial Services and Markets Act 2023?

The Act modifies the UK’s Money Laundering Regulations 2017, including changes to customer due diligence, especially for domestic Politically Exposed Persons. It allows changes to AML/KYC in sandboxes and requires the FCA to reassess guidance.

• Modify or disapply AML/KYC in FMI sandboxes.
• Amend Money Laundering Regulations 2017 regarding money laundering.
• Amend customer due diligence provisions in Money Laundering Regulations 2017.
• Change treatment of domestic Politically Exposed Persons in customer due diligence.
• Mandate FCA review of guidance on Politically Exposed Persons.
• Assess adherence to and revise FCA PEP guidance.

What is the scope of Stablecoins or cryptoassets under the UK Financial Services and Markets Act 2023?

‘Cryptoasset’ is defined as a digital value using cryptographic technology (e.g., DLT). ‘Digital settlement asset’ is a subset used for payments. The Treasury can adjust these definitions. Source

What own capital or solvency buffer requirements apply under the UK Financial Services and Markets Act 2023?

The Act does not specify capital or solvency requirements for stablecoin issuers in the available documentation.

What Redemption right and deadline requirements apply under the UK Financial Services and Markets Act 2023?

The provided material does not include redemption right or deadline obligations for stablecoins.

What are the requirements for Travel Rule coverage and information accompanying transfers under the UK Financial Services and Markets Act 2023?

The Act incorporates the Travel Rule into UK law by defining cryptoassets and modifying applicable AML regulations.

• Revoke EU Regulation concerning information accompanying transfers.
• Retain UK’s Money Laundering Regulations 2017 as operative framework.
• Identify UK regulations as modifiable for FMI sandboxes.
• Define cryptoasset for applying Travel Rule requirements.
• Mandate Treasury power to amend UK Travel Rule regulations.
• Specify amendments for customer due diligence, including politically exposed persons.

Is Permissionless Transfer Allowed for Stablecoins Under UK FSMA 2023?

Under the Act, permissionless transfers may be tested within FMI sandboxes. These environments allow temporary exemption from certain rules to explore new mechanisms.

• Establish FMI sandboxes for testing activities.
• Assess efficiency of FMI activities using new technology.
• Disapply or modify relevant enactments within a sandbox.
• Test practices not permissible under standard requirements.
• Explore various on-chain transfer mechanisms.

What are the Reserve Ratio and Eligible Asset Requirements for Stablecoins under the UK Financial Services and Markets Act 2023?

The Act permits regulations that apply e-money rules to stablecoins, which may include reserve ratios and safeguarding of assets.

• Empower Treasury to make regulations for digital settlement assets.
• Regulations may apply existing e-money rules.
• This could extend backing and safeguarding requirements.

What Public Reserve Composition Disclosure and Transparency Rules Apply Under UK FSMA 2023?

The source documentation does not detail rules regarding disclosure of reserve composition for stablecoins.

What are the Holder Identity or KYC Requirements under the UK Financial Services and Markets Act 2023?

Specific holder identity or KYC obligations for stablecoin users were not included in the provided materials.

What Rules Govern Retail Availability and Access to Stablecoins Under the UK Financial Services and Markets Act 2023?

The Act empowers the Treasury to regulate how stablecoins are offered to UK retail clients. It includes rules on marketing, sales, and financial promotions.

• Enable Treasury to designate regulated activities for UK sales, including retail.
• Clarify cryptoassets like stablecoins may be subject to designated activities regime.
• Anticipate retail clients acquiring certain financial products under the framework.
• Extend financial promotion restrictions to cover cryptoasset marketing to UK persons.
• Require authorized persons to have FCA permission to approve cryptoasset promotions.
• Mandate permission for authorized firms to approve unauthorised firms’ crypto promotions.
• Grant Treasury powers to create regulations for DSA payments.

What is the Failure/resolution-regime for stablecoin issuers under UK-Financial-Services-and-Markets-Act-2023?

The Treasury may establish insolvency rules and resolution regimes for DSA service providers, potentially modifying existing laws. CCPs also have a special resolution framework.

• Empower Treasury to create insolvency rules for recognized DSA service providers.
• Apply or modify existing insolvency law for DSA service providers.
• Establish a special resolution regime for CCPs.
• Require Bank of England consent for ordinary CCP insolvency under distress.
• Allow Treasury to establish compensation schemes for CCP stakeholders.
• Mandate Bank of England reporting on CCP write-downs to the Chancellor.
• Include recognised DSA service providers in FMI administration regime objectives.