The UK Treasury has announced, that it is in favor of regulating fiat-backed stablecoins for payments. Their proposal however doesn’t include algorithmic stablecoins, which according to them do not provide sufficient stability.
The Treasury of the United Kingdom announced that it is seeking stablecoin regulation for the purpose of payments but doesn’t plan to include algorithmic stablecoins in light of the Terra debacle. They will only consider stablecoins pegged to a fiat currency; a sentiment that seems to be echoed by regulators around the word. The UK Treasury’s announcement keeps in step with fiscal elements of the Queen’s speech about how they will push forward with a plan to regulate stablecoins based on financial regulation.
FCA has been cautious so far
Rishi Sunak, the Chancellor of the UK Treasury, indicated in a speech on Nov. 9, 2020, that stablecoins and central bank digital currencies (CBDCs) could provide more efficient payment processing networks. The UK government will adapt existing laws governing electronic money to suit stablecoins and, in doing so, bring stablecoins under the watch of the Financial Conduct Authority (FCA).
The watchdog so far has erred on the side of caution by allowing only a limited number of cryptocurrency operators to set up shop within the UK, forcing other businesses elsewhere whose AML checks were deemed insufficient. Last month the economic secretary to the Treasury said that the UK is open for business and open for crypto business. Rishi Sunak wants to ensure that the UK financial services industry is always at the forefront of technology and innovation. Sunak, earlier this year, commissioned the Royal Mint to create a non-fungible token (NFT) by summer 2022 to earmark the forward-thinking approach of the UK government regarding the crypto industry.
U.S. moves forward in stablecoin regulation
The recent collapse of the Terra and LUNA algorithmic stablecoins has cast a pall on what was once thought a haven for crypto enthusiasts to park their dollars. Senator Pat Toomey of Pennsylvania, USA, urges the federal government to regulate stablecoins in the wake of the “bank run” that depleted Terra’s liquidity reserves and sent shockwaves through the entire crypto market as significant selloffs took place.