The UK government has rolled out proposals on how to regulate fiat-backed stablecoins.

Crypto companies that want to offer services with overseas stablecoins like Tether (USDT) in the UK must get permission from the Financial Conduct Authority (FCA).

According to the update on plans for regulating fiat-backed stablecoins, fiat-backed stablecoins issued in or from the UK by authorized persons will be permitted for use in the country.

The government also said it “wishes to accommodate” overseas fiat-backed stablecoins for goods and services but insisted that brokers or payment providers willing to work with these stablecoins will still have to be authorized by the FCA.

Under the proposed update on the legislation, the FCA will also be able to rule the issuance and custody of fiat-backed stablecoins issued in or from the UK. Those stablecoins not backed by fiat “will still be allowed to be used in payment chains, but these transactions will remain unregulated.”

The legislation will be introduced by early 2024, subject to available parliamentary time.

In late October 2023, the FCA issued a statement warning crypto firms that they still need to comply with the new rules on financial promotions for crypto assets. The FCA added it has also identified over 220 breaches by crypto firms since then and will take “robust action” against them.

The FCA’s statement came weeks after it had issued a “final warning” to crypto firms in September, urging them to prepare for the new regime and seek necessary approvals or exemptions before the deadline. The watchdog also said it was disappointed by the lack of engagement from the crypto industry and that it had received less than twenty responses to its consultation paper on the rules.