Golden Finance reported that James Kemp, managing director of technology and operations at the Association for Financial Markets in Europe (AFME), provided advice on the UK’s crypto asset custody rules, saying:
The territorial scope of regulated custody activities should not depart from current market practice. We disagree with the proposal to expand the territorial scope to cover relevant crypto-asset activities conducted outside the UK. This proposed approach would be a significant departure from the way the territorial scope of regulated financial services activities, including custody of security tokens, is currently determined under the UK framework.
* Crypto assets that qualify as specific investments (including security tokens) should be treated as specific investments across the regulatory framework and should not be subject to the proposed separate custody regime. The FCA’s approach to regulating the custody of crypto assets should distinguish between the custody of crypto assets that qualify as specific investments (including security tokens) and the custody of other crypto assets (including stablecoins). Existing FCA rules should be maintained for the custody of crypto assets that meet the definitions of specific investments (including security tokens) and tokenized deposits.
* To facilitate and incentivize the issuance of regulated stablecoins, the criteria for FCA-regulated and BoE-regulated stablecoins should not be overly restrictive. We believe that the criteria for backing assets should be expanded to include short-term government bonds, cash deposits for FCA-regulated stablecoins and central bank deposits for BoE-regulated systemic stablecoins, and should at least include high-quality liquid assets.
*Wholesale financial institutions must be able to easily access and use stablecoins issued overseas (such as USDC). We believe that the FCA should reconsider the proposed requirements for UK payment arrangers related to wholesale payment chains, or at least delay their implementation until international frameworks and markets mature.
