The UK Treasury, or Her Majesty’s Ministry of Finance, has reportedly decided to continue regulating stablecoins as legal tender. While the cryptocurrency community is applauded, the decision comes as a shock due to its proximity to the recent collapse of one of the most popular algorithm stablecoins, TerraUSD (UST).
A local report from The Telegraph pointed to the Treasury’s plans to control stablecoins across the UK, as revealed in the Queen’s speech. In his speech, Prince Charles announced the introduction of new legislation in various sectors, including measures to drive economic growth to improve living standards in the region, adding:
“A bill will be presented to further strengthen the power to deal with illegal finances, reduce economic crime and help companies grow [Economic Crime and Corporate Transparency Bill]”
The Cointelegraph’s report of 4 April drew the attention of the UK’s Ministry of Economic Affairs and Finance, which cited a change in its current regulatory framework to adopt stablecoins as a means of payment.
Minister of Economic Affairs @JohnGlenUK announced today that stablecoins will be incorporated into UK payment regulations.
This puts the UK financial services industry at the forefront of technology, creating conditions for stablecoin issuers and service providers to operate and invest. image.twitter.com/14SsIGW5bf
– HM Treasury (@hmtreasury) April 4, 2022
Although the recent collapse of the Terra ecosystem – which led to the irreversible collapse of LUNA and UST – was expected to raise a red flag among regulators, the UK Treasury maintains its policy “to ensure that UK financial services are always at the forefront of technology and innovation, “said Chancellor Rishi Sunak.
However, the Treasury’s plan does not involve legalizing stablecoins algorithms and instead chooses 1: 1 full-backed stablecoins such as Tether (USDT) or USD Coin (USDC). According to a spokesman for the Treasury:
“Legislation to regulate stablecoins, as they are used as a means of payment, will be part of the bill on financial services and markets introduced in the Queen’s speech.
By legalizing stablecoins for the UK market, the Treasury aims to open up growth opportunities while ensuring financial stability when introducing new financial technologies. To underline the fact that the value of the ICT symbol Terra was pegged to another cryptocurrency, the spokesman said:
“It has become clear to the government that certain stablecoins are not suitable for payment as they share features with unsecured cryptocurrencies.
Connected: SEC Hester Peirce says new stablecoin regs need to allow room for failure
Police Chief Hester Peirce of the US Securities and Exchange Commission (SEC) recently pointed to the need for “room for error” while supporting the regulatory framework for stablecoins.
I would be happy to talk about how to achieve the SEC’s regulatory objectives without hindering the experiment and error that is so essential to innovation. CommissionerPeirce@sec.gov
– Hester Peirce (@HesterPeirce) 14 May 2022
When Peirce spoke on the online panel, he mentioned the growing interest in stablecoins among regulators. As the Cointelegraph reported, Peirce urged the SEC to grant exemptions for certain technologies, which it believes would allow the necessary experiments:
“We need to allow room for error because it’s obviously part of trying new things and our framework actually allows for trial and error. I hope we will use it for that purpose. “
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