Stablecoins and the potential of a global cryptocurrency – Hannah Raphael writes for Lexis Nexis

Stablecoins and the potential of a global cryptocurrency – Hannah Raphael writes for Lexis Nexis

BCL senior associate Hannah Raphael’s latest cryptocurrency article has been published by LexisNexis, covering the potential launch of new digital cryptocurrencies called ‘Global Stablecoins’ and their potential impact.

Here’s an extract from the article:

“What are global stablecoins and how do they work?

The term ‘global stablecoin’ is relatively new. It was introduced for the first time in the report titled, ‘G7 Working Report on Stablecoins’ published on 18 October 2019 by the Bank of International Settlements. The report was commissioned following Facebook’s announcement to issue its own cryptocurrency, Libra.

Stablecoins are a type of cryptoasset whose value is stabilised via a number of different mechanisms. The most common type of stablecoin is one that is pegged to a fiat currency, usually the USD, or a basket of fiat currencies.

Other kinds of stablecoins include those that are backed by:
• commodities, for example gold or oil
• a basket of cryptoassets
• algorithms designed to maintain the supply of the coin

In essence, stablecoins are an effort to combine the best attributes of fiat and crypto, by offering the instant processing and the security of payments offered by crypto and the stable valuations offered by fiat.

A stablecoin built on an already enormous and international customer base (such as Facebook’s) would have the potential to scale rapidly to achieve global coverage, and in so doing would become what the Bank of International Settlements has called a ‘Global Stablecoin’ (GSC).

How are stablecoins characterised for the purpose of regulation?

Although stablecoins have a common purpose, they can vary greatly in their structure and arrangement and therefore classification must be made on a case by case basis. In the UK cryptoassets are regulated by the Financial Conduct Authority (FCA).
The FCA’s ‘Guidance on Cryptoassets Feedback and Final Guidance to CP 19/3’ categorises cryptoassets into separate types of token. According to the guidance, many stablecoins backed by fiat currencies will be e-money tokens—some will be security tokens and others may be neither one or the other. Characterisation will depend upon a careful analysis of the structure that attaches to the token and the nature of its underlying assets.”


This article was originally published by LexisNexis on 06/01/2020. You can download the pdf or read on their site.

Hannah Raphael is a solicitor at BCL specialising in all areas of business and general crime. She has defended clients in proceedings instituted by the SFO, the FCA, HMRC, the Information Commissioner’s office and the CPS. Hannah has acted for high profile clients in relation to allegations of conspiracy to defraud, insider dealing, money laundering, breaches of data protection, and computer misuse.