Less than a week after Terra’s $50 billion collapse, UK officials are moving forward with legalizing and regulating stablecoins.
The UK’s Treasury Department said it would be including plans to regulate the crypto sector as a payment mechanism in new financial legislation announced by the Queen. Algorithmic stablecoins like UST will not be included in the new laws, as the Treasury has said they don’t guarantee stability the same way as traditional reserve-backed stablecoins.
“Legislation to regulate stablecoins, where used as a means of payment, will be part of the Financial Services and Markets Bill which was announced in the Queen’s Speech,” a Treasury spokesman said.
“This will create the conditions for issuers and service providers to operate and grow in the UK, whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely.
The Government has been clear that certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto assets. We will continue to monitor the wider crypto asset market and stand ready to take further regulatory action if required.”
Last month, the UK announced plans to write new regulations for stabelcoins and the release of a “Royal Mint” on a non-fungible token (NFT).
Rishi Sunak, Chancellor of the Exchequer said it was his ambition to make the UK a “global hub for crypto asset technology,” adding that the legislative plans were aimed at helping crypto firms to “invest, innovate and scale up” in the country.
“We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term,” he said. “This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation.”
Stablecoins have come under scrutiny following the implosion of both LUNA and UST. US Treasury Secretary Janet Yellen said last week that the debacle “simply illustrates that this is a rapidly growing product and there are rapidly growing risks.” She urged for new regulations on the sector by the end of this year.