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UK Treasury announces stablecoin regulation

 


The British Treasury now wants to get serious about regulating stablecoins. However, the timing of the announcement makes the crypto community prick up their ears, as it comes amid the current scandal surrounding the blockchain project Terra (LUNA) and the associated algorithmic stablecoin TerraUSD (UST).


As reported by The Telegraph , Her Majesty's Treasury announced in this year's Queen's Speech that stablecoins should be regulated in the upcoming parliamentary term. The opening speech, delivered by Prince Charles for the first time this year, announced a series of political measures, which now also include (value) stable cryptocurrencies, it says:


"A corresponding bill [the Economic Crime and Corporate Transparency Bill] should ensure that we can take stronger action against illegal financial activities and white-collar crime in order to support economic growth."

As early as April 4, Cointelegraph reported that the UK Treasury is looking to change the law to allow stablecoins to be treated as a means of payment under the existing legal framework.


While the crypto community had already expected that the drama surrounding the sudden collapse of LUNA and UST would bring renewed pressure from regulators, the reaction from the UK has been surprisingly quick. In this context, the British Treasury emphasizes that "British financial technology should at all times be at the forefront of technical innovation".


However, a legalization of algorithmic stablecoins seems extremely unlikely, as the Treasury probably prefers stablecoins backed by cash reserves such as Tether ( USDT ) and USD Coin ( USDC ). A spokesman for the ministry confirmed:


“Regulating stablecoins, for their intended use as a means of payment, will be part of the Financial Services and Financial Markets Bill announced at the Queen's Speech.”

By legalizing stablecoins, Her Majesty's Treasury aims to open up new growth opportunities while minimizing their risk to financial stability. Accordingly, the ministry spokesman emphasizes that the Terra stablecoin was secured by a second cryptocurrency, which is why it was out of the question as a means of payment:


"Our government has made it clear that certain stablecoins are not suitable as a means of payment because they have certain characteristics of cryptocurrencies."

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