The UK Financial Conduct Authority is getting serious on stablecoins.

On Wednesday, the financial watchdog launched a special cohort within its Regulatory Sandbox for firms issuing blockchain-based tokens pegged to currencies like the British pound and US dollar.

“It’s a unique chance for innovative firms to test their stablecoin products and services under the UK’s evolving regulatory regime,” David Geale, the FCA’s executive director for payments and digital finance, said in a speech shared with DL News.

Geale added that the initiative will support agile policymaking and industry development, and gives firms the opportunity to provide the regulator with practical feedback.

The announcement follows several previous consultations and requests for comment from the regulator.

In October, the FCA outlined plans to support tokenisation of the UK’s nearly $19 trillion asset management industry. In September, it launched an open call for comment on how it should regulate crypto companies in the country.

Lagging regulation

In the UK, crypto assets are still largely unregulated.

And when the government has weighed in, its ideas haven’t always been well received.

The Bank of England has forged ahead with a proposal to temporarily cap individual stablecoin holdings to between £10,000 and £20,000, and business to £10 million.

The limits have drawn broad criticism from both industry insiders and UK legislators.

“Does this not send a terrible signal to people who want to base their crypto businesses in the UK?” Lord Ed Vaizey, co-chair of the UK Parliament’s Crypto and Digital Assets All Party Parliamentary Group, asked in an October debate.

In comparison, the EU and US have been more proactive in regulating digital assets.

The EU’s Markets in Crypto-Assets Regulation — or MiCA — rules came fully into effect in December, while the US passed landmark stablecoin regulation in July, and is currently working on a more comprehensive crypto market structure bill.

The UK’s sluggishness to regulate the crypto industry has pulled it behind these regions, Bivu Das, crypto exchange Kraken’s UK general manager, told DL News last month.

“At least they’re on the road, but we’re sitting there on the hard shoulder, waiting to see if the other two crashes before deciding what to do,” Das said.

‘A major firm’

The FCA’s stablecoin cohort is a significant step towards regulating the crypto industry, although policy statements from the regulator are still likely many months away.

Geale said “a major firm” has already been accepted into the cohort, and is gearing up to test a British pound stablecoin in the next couple of months.

It’s not the FCA’s only iron in the fire, either.

Yesterday, the regulator announced that Eunice, a financial regulatory platform, has joined its sandbox to explore how disclosure templates can boost transparency for crypto investors.

Eunice will seek input from industry players to help consumers understand what they’re investing in, influencing how the FCA approaches disclosure requirements, Geale said.

There are also plans for several in-person stablecoin policy sprints in March.

“These sprints will further consider retail and wholesale use cases for stablecoins, and help determine where regulation is or is not needed,” Geale said.

Stablecoin firms wishing to participate in the FCA’s sandbox will have until January 18 to apply.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.