The UK Treasury has confirmed its commitment to regulating stablecoins following the collapse of terrausd (UST) and terra (LUNA). A Treasury spokesman said: “This will create conditions for issuers and service providers to operate and grow in the UK, while ensuring financial stability and high regulatory standards.”
UK regulation of stablecoins
Britain’s Treasury Department, HM Treasury, is moving forward with plans to regulate stablecoins for payments, despite last week’s collapse in the cryptocurrency market, The Telegraph reported on Saturday.
This must have happened after Terra crashed, causing the algorithmic stablecoin terrausd (UST) to lose its peg to the dollar and terra (LUNA) to drop to near zero.
A Treasury spokesman said:
Legislation regulating stablecoins as a means of payment will be part of the Financial Services and Markets Act announced in the Queen’s Speech.
“This will create the conditions for issuers and service providers to operate and grow in the UK, while ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely,” the spokesperson added.
Prince Charles delivered the Queen’s Speech last week outlining the legislative agenda for the UK government’s next parliamentary year. Two of the bills specifically mention cryptoassets.
The U.K. government unveiled a detailed plan in April to make the country a global cryptocurrency hub and “a welcoming place for cryptocurrency.” The plan includes establishing a dynamic crypto regulatory framework, overseeing stablecoins, and partnering with the Royal Mint to create a non-fungible token (NFT) that will be released in the summer.
Chancellor of the Exchequer Rishi Sunak said the plan would “ensure that the UK financial services industry remains at the forefront of technology and innovation”.
However, the Treasury Department does not plan to incorporate algorithmic stablecoins into legislation, saying they do not guarantee stability. Terrausd (UST) is an example of an algorithmic stablecoin.
A spokeswoman for the UK Treasury further detailed:
The government has made it clear that certain stablecoins are not suitable for payment purposes because of the characteristics they share with unsecured cryptoassets.
“We will continue to monitor the broader cryptoasset market and stand ready to take further regulatory action should the need arise,” the spokesperson added.
U.S. lawmakers also last week called for urgent regulation of stablecoins following Terra’s collapse. However, Treasury Secretary Janet Yellen believes that stablecoins currently pose no real threat to U.S. financial stability.
What do you think of the UK government’s commitment to regulating stablecoins? Let us know in the comments section below.
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