Regulators Unite to Build Global Stablecoin Firewall
Regulators around the world are building a 'global stablecoin firewall' to control cross-border transactions using pegged tokens. This includes the U.S., U.K., Hong Kong, and European Union, which have proposed or implemented regulations that grant them authority to identify, freeze, and redirect stablecoin transfers.
The new rules will affect anyone involved in cross-border transactions using stablecoins pegged to the dollar or pound sterling, including individuals sending remittances and companies' treasury departments. Stablecoins can move quickly on the blockchain, but their users' entrance and exit points create opportunities for regulatory oversight and intervention.
For example, the U.S. Treasury has proposed regulations for the implementation of the illicit-finance provisions of the GENIUS Act, which aims to make intermediaries and issuers traceable and not anonymous. The proposal pairs these rules with enforcement actions, such as the imposition of sanctions on crypto exchanges allegedly providing financial help to Iran's Islamic Revolutionary Guard Corps.
Other countries are also implementing their own regulations. In the U.K., the Financial Conduct Authority (FCA) has published final rules on fiat-backed stablecoins, bringing their issuance and custody under the Financial Services and Markets Act. However, the use of these coins in retail payments will be regulated under the Payment Services Regulations.
The Bank of England and FCA have also outlined how they intend to oversee issuers classified as 'systemic' by HM Treasury under the Banking Act of 2009. This includes factors such as size, use, ease of substitutability, and links to other coins.