Stablecoins - Who will achieve regulation, the United States or the United Kingdom?

The debate on stablecoins is far from over. In the United States, the Treasury has recently advocated for a minimal federal regulatory framework for stablecoins. Meanwhile, in the United Kingdom, the AFME is issuing warnings regarding the regulatory proposals of the Financial Conduct Authority (FCA). Which of these major powers will achieve regulation?

The U.S. Treasury Secretary in favor of a federal regulation of stablecoins

During a hearing in early February 2024 before the House Financial Services Committee, Janet Yellen informed legislators that the government’s financial authorities want to establish a minimal level of federal regulation for stablecoin issuers. This would be beyond the current regulations applied by some States. 

According to Yellen, a federal regulator should have the power to determine whether stablecoin issuers should be prevented from issuing such assets. This stance provokes a debate with Republicans! They are in favor of greater authority for state regulators in this matter.

The Association for Financial Markets in Europe issues warnings in the UK

Meanwhile, in the United Kingdom, the Association for Financial Markets in Europe (AFME) submitted comments to the British Financial Conduct Authority (FCA) regarding its stablecoin regulation proposals. 

Overall, the AFME welcomes the proposals but cautions against certain aspects. Its director, James Kemp, is concerned about the treatment of security tokens, which he believes should be considered as securities throughout their lifetime.

The AFME also suggests to the FCA to refrain from applying parts of the proposal to stablecoins issued abroad until the establishment of international frameworks.

Different approaches on both sides of the Atlantic

These two pieces of news highlight different approaches from American and European regulators regarding stablecoins. In the United States, the debate is about the appropriate level of regulation between state governments and the federal government. 

In Europe, the challenge is more about harmonizing regulations between countries to ensure the integrity of the single market. But in both cases, the goal remains the same: to regulate stablecoins to limit risks without stifling innovation.

Although the United Kingdom is tending towards more regulatory autonomy since Brexit, this warning from the AFME reminds us of the importance of coordination among European regulators to ensure harmonized rules. Stablecoin regulation requires a global approach to avoid blind spots or contradictions. The dialogue continues between London and Brussels to align technological innovations and investor protection.