The Bank for International Settlements (BIS) and the Bank of England are collaborating on a real-time stablecoin tracking project
The UK’s financial regulator is implementing stricter oversight of the cryptocurrency industry, with a specific focus on controversial stablecoins.
Enhancing Regulation with Pike Trial
The UK Financial Services Authority has introduced the Pike trial to strengthen regulatory measures. This trial encompasses monitoring stablecoin debt, backing assets, and other tokenized products supported by real assets. Data extraction from user systems enables on-chain accountability verification.
“The technology behind Pike Trial helps regulators proactively detect issues with stablecoin support, paving the way for comprehensive data-driven policy frameworks. Monitoring the balance sheet of asset-backed stablecoins offers insights into asset-liability ratios.”
Although Pike Trial is currently in a beta phase, efforts are underway to train employees for system operation.
Challenges in Validity and Regulation
UK regulators have raised concerns regarding the authenticity of reserves claimed by stablecoin issuers. Tensions between financial authorities and stablecoin issuers have intensified due to these discrepancies.
Some issuers like Tether and exchanges such as Binance have initiated self-regulation efforts. Instances like the FTX crash have prompted exchanges to disclose proof of holdings to alleviate regulator concerns.
Stablecoin Market and Regulatory Concerns
Stablecoins have seen rapid growth, reaching a market capitalization of $164.2 billion. However, the largely unregulated industry has sparked regulatory worries, especially surrounding disclosures and market stability during stress periods.
SEC Chairman Gary Gensler views certain stablecoins as securities and advocates for enhanced registration and regulation. In a notable case, the U.S. SEC investigated the legality of the Binance U.S. stablecoin, BUSD, eventually retracting its complaint following a court ruling in Binance’s favor.
This ruling not only buoyed the U.S. stablecoin sector but also contributed to improvements in the UK stablecoin market.
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