Former BoE fintech lead asserts that UK regulations will enable harmonious coexistence of stablecoins and CBDCs.

A collaborative effort among the U.K.’s Treasury, the Bank of England (BoE), and the Financial Conduct Authority (FCA) could pave the way for the development of regulations that allow for the coexistence of cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs) in the country. In an exclusive interview with Cointelegraph, Varun Paul, formerly the head of Fintech at the BoE and now the senior director for CBDCs and financial market infrastructure at Fireblocks, discusses the U.K.’s progress in establishing regulations that support the use of cryptocurrencies and stablecoins while ensuring investor protection and financial stability. Paul notes that the U.K. is catching up with the European Union’s Markets in Crypto-Assets Regulation (MiCA), which is considered the most advanced regulatory framework globally. He explains that there was a time when the FCA refrained from regulating crypto to avoid endorsing it, causing the U.K. to fall behind Europe. However, the recent publications from the U.K. Treasury show their determination to bring the country on par with the EU and position London as a Fintech and crypto hub. Paul emphasizes the advantage of coordination among the Treasury, BoE, and FCA, as it allows for faster development of regulations compared to the EU, which has to coordinate rules between different states. He adds that the U.K.’s regulatory approach strikes a balance between fostering innovation and maintaining financial stability. Paul also highlights the importance of stablecoins in the crypto ecosystem, noting that they serve as a gateway for accessing the broader cryptocurrency market. He acknowledges the concerns surrounding the transparency of Tether’s reserves for circulating USDT and mentions that the U.K. regime requires stablecoins to be redeemable at par and held in liquid assets. However, the U.K. policymakers are aware of the demand for cryptocurrencies and digital money, and Paul suggests that different institutions will utilize stablecoins and CBDCs based on specific use cases. In a white paper published by Fireblocks, Paul explores the potential of a smart contract-managed system that allows central banks to issue CBDCs as a base asset for commercial bank tokenized deposits and stablecoins. He explains that the choice between stablecoins and CBDCs will depend on specific use cases and individual preferences. Finally, the U.K.’s Economic Secretary to the Treasury, Bim Afolami, has indicated that the government is working towards passing legislation to regulate stablecoins and cryptocurrency staking by the end of 2024.