The Treasury is pushing ahead with plans to legalize cryptocurrencies known as “stablecoins” as a form of payment in Britain, despite a market crash this week.
The ministry said it would include plans to regulate stablecoins as a payment mechanism in financial legislation announced in the Queen’s Speech.
This comes despite the collapse of Terra, one of the best-known stablecoins, earlier this week.
Cryptocurrency markets descended into chaos when Terra, which is supposedly guaranteed to be worth one dollar, lost more than 85% of its value and led to a precipitous selloff in other cryptocurrencies.
More than $300 billion has been slashed from the total value of all cryptocurrencies over the past week, with the market falling to a low not seen in over a year.
Last month, John Glen, the Economic Secretary of the Treasury, announced that the government would introduce “a world-leading regulatory regime for stablecoins”.
Rishi Sunak, the chancellor, said he would “ensure that the UK financial services sector is always at the forefront of technology and innovation”.
While the Treasury does not plan to include so-called “algorithmic stablecoins” such as Terra in the legislation, saying they do not guarantee stability, the price of other supposedly more secure reserve-backed coins has risen. also dipped this week.
“Legislation to regulate stablecoins, when used as a means of payment, will form part of the Financial Services and Markets Bill which was announced in the Queen’s Speech,” a spokesperson said. of the Treasury.
“This will create the conditions for issuers and service providers to operate and grow in the UK, while ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and securely.
“The government has made it clear that some stablecoins are not suitable for payment purposes because they share characteristics with unbacked crypto assets. We will continue to monitor the broader crypto asset market and stand ready to take further regulatory action if necessary. »
Unlike many stablecoins, which are backed by currency reserves and other investments, Terra’s value was tied to a separate cryptocurrency known as Luna, with software used to maintain its price. Its price fell last week when confidence in the system collapsed.
Proponents of stablecoins believe they will make payments more efficient and secure, while reducing fees such as for cross-border transactions.
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Rishi Sunak To Legalize ‘Stablecoins’ Despite Cryptocurrency Crash
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