The UK Treasury has declared that it is open to stablecoin regulation for payment purposes but that algorithmic stablecoins would be excluded due to their lack of stability. Only stablecoins backed by fiat currencies will be considered. This comment is in line with the queen’s son Prince Charles’ Tuesday speech, which included fiscal issues.
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.
A spokesperson from the Exchequer
The Queen also addressed the growing cost of living that many Britons are facing as a result of the pandemic, with inflation approaching 10% and energy prices rising.
UK government has been cautious with the decision
Chancellor of the Exchequer Rishi Sunak suggested stablecoins and central-bank digital currencies might enhance payment processing networks in a speech on November 9, 2020.
If the UK government changes current electronic money legislation to meet stablecoins, the Financial Conduct Authority will regulate them.
So far, the watchdog has stayed cautious by allowing just a small number of bitcoin businesses to open shop in the UK, forcing other businesses with insufficient AML checks to operate abroad. Last month, the Treasury’s economic secretary remarked, “The UK is open for business and opens for crypto trade.”
“The UK financial services business must always be at the forefront of technology and innovation,” Sunak says. To represent the UK government’s forward-thinking position on the crypto business earlier this year, Sunak commissioned the Royal Mint to create a non-fungible token (NFT) before summer 2022.
The untimely tragedy of the Terra and LUNA algorithmic stablecoins has cast a pall on what was once thought to be a secure haven for cryptocurrency investors.
Senator Pat Toomey of Pennsylvania has called on the federal government to regulate stablecoins in the wake of Terra’s “bank run,” which depleted the company’s liquidity reserves and sent shockwaves across the crypto market with significant selloffs.