The UK Treasury Department, or Her Majesty’s Treasury, has decided to go ahead with regulating stablecoins as legal tender. Although it is welcomed by the cryptocurrency community, The decision is surprising given its proximity to the recent crash of one of the most popular algorithmic stablecoins, TerraUSD (UST).
A local report by The Telegraph highlighted the Treasury’s intention to regulate stablecoins across Britain., which was revealed during the Queen’s Speech. During the speech, Prince Charles announced the introduction of new legislation in various sectors, including measures to boost economic growth to improve living standards in the region, adding:
“A bill will be introduced to further strengthen powers to tackle illicit finance, reduce economic crime and help businesses grow [Proyecto de Ley sobre Delitos Económicos y Transparencia Empresarial]”
The Cointelegraph report on April 4 reported the recent action ofthe department of the UK Ministry of Economy and Finance, which cited the modification of its existing regulatory framework to incorporate stablecoins as a means of payment.
Economic Secretary @JohnGlenUK announced today that stablecoins will be brought into UK payments regulation.
This places the UK financial services sector at the forefront of technology, creating conditions for stablecoin issuers and service providers to operate and invest. pic.twitter.com/14SsIGW5bf
— HM Treasury (@hmtreasury) April 4, 2022
Finance Secretary @JohnGlenUK today announced that stablecoins will be brought into UK payment regulation. This puts the UK financial services sector at the forefront of technology, creating the conditions for stablecoin issuers and service providers to trade and invest.
While the recent crash of the Terra ecosystem – which saw an irrecoverable crash of LUNA and UST – was expected to raise alarm bells among regulators, the UK Treasury remains on course “to ensure the UK financial services industry is always at the forefront of technology and innovation”, as Chancellor Rishi Sunak previously stated.
Nevertheless, Treasury’s plan does not involve legalizing algorithmic stablecoins and instead prefers 1:1 fully backed stablecoins like Tether (USDT) or USD Coin (USDC). According to the Treasury spokesman:
“Legislation to regulate stablecoins, when used as a means of payment, will form part of the Financial Markets and Services Bill that was announced in the Queen’s Speech.”
By legalizing stablecoins for the UK market, the Treasury aims to open up growth opportunities while ensuring financial stability by introducing new financial technologies. Underscoring the fact that Terra’s UST token value was pegged to a different cryptocurrency, the spokesperson stated:
“The Government has been clear that certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto assets.”
Commissioner Hester Peirce, of the United States Securities and Exchange Commission (SEC), He recently highlighted the need to “leave room for failure” while endorsing a regulatory framework for stablecoins.
I’d be happy to talk about how to achieve the SEC’s regulatory objectives without impeding the trial and error that is so essential to innovation. CommissionerPeirce@sec.gov
— Hester Peirce (@HesterPeirce) May 14, 2022
I would be happy to discuss how to achieve the SEC’s regulatory goals without impeding the trial and error that is so essential to innovation. CommissionerPeirce@sec.gov
During his speech in an online panel, Peirce mentioned the growing interest of regulators in stablecoins. As Cointelegraph reported, Peirce urged the SEC to provide exemptions to certain technologies, which she argued would allow necessary experimentation:
“We have to leave room for failure because obviously that’s part of trying new things and our framework really allows for that kind of trial and error. I hope we use it for that purpose.”
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