The U.K could become the first country to provide a legislative framework for fiat-pegged crypto assets specifically.
Key Takeaways
- Her Majesty’s Treasury has confirmed plans to regulate stablecoins as a form of payment in the U.K.
- The legislation will be part of a new Financial Services and Markets Bill designed to strengthen the U.K.’s financial services industry.
- The Treasury's push for crypto legislation follows Chancellor Rishi Sunak's call for the U.K. to become “a global hub for cryptoasset technology.”
Her Majesty’s Treasury has confirmed plans to legalize stablecoins as a form of payment in a new Financial Services and Markets Bill announced on May 10.
U.K. To Regulate Stablecoins
Stablecoins are set to receive regulation in the U.K.
Per a Saturday report from U.K. newspaper The Telegraph, Her Majesty’s Treasury has confirmed plans to regulate crypto stablecoins as a form of payment in a new bill.
The Treasury expanded on its commitment to crypto adoption outlined in the Queen’s Speech to parliament on May 10, stating that a regulatory framework for stablecoins is key to its schedule. “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 spokesperson said.
The push to regulate fiat-pegged crypto assets comes as the crypto market experienced its most brutal selloff in over ten months. The fall in prices was triggered by a bank run on TerraUSD (UST), an algorithmic stablecoin that utilized market forces to maintain its dollar peg.
When UST started to drift from its dollar peg on May 9, investors rushed for the door, highlighting a key weakness in the stablecoin’s design. UST now trades for less than $0.10, with chances of regaining its peg looking increasingly slim.
While UST’s collapse has spurred more general efforts to regulate stablecoins in the U.S., the U.K. government has clarified that the new legislation will only deal with collateral-backed stablecoins such as Tether’s USDT and Circle’s USDC.
A Treasury official stated that “certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto assets,” presumably in reference to algorithmic stablecoins such as UST.
While the crypto market is still reeling from the downfall of UST, U.K. officials have maintained their optimistic outlook on blockchain technology. In April, U.K. Chancellor of the Exchequer Rishi Sunak said that he wanted the U.K. to become “a global hub for cryptoasset technology.”
More recently, the Treasury explained that the planned stablecoin legislation will “create the conditions for issuers and service providers to operate and grow in the U.K., whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely.”
The upcoming stablecoin legislation will be part of the U.K.’s new Financial Services and Markets Bill. The bill aims to strengthen the U.K.’s financial services industry and establish a coherent, agile, and internationally respected approach to financial services regulation. The Treasury has stated that more bill details will be available when it is formally introduced later this year.