Her Majesty’s Treasury (Exchequer) will push forward with a plan to regulate stablecoins based on financial regulation outlined in the Queen’s speech on May 10, 2022.
The U.K. Treasury announced that it is open to stablecoin regulation for the purpose of payments but doesn’t plan to include algorithmic stablecoins since they do not provide stability. They will only consider stablecoins pegged to a fiat currency. This announcement keeps in step with fiscal elements of the queen’s speech made by her son Prince Charles on Tuesday.
“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,” said a spokesperson from the Exchequer. “The Government has been clear that certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto assets. We will continue to monitor the wider crypto asset market and stand ready to take further regulatory action if required.”
The Queen’s speech also addressed the cost-of-living crisis facing many Britons after the pandemic, with inflation soaring to 10% amidst high energy prices.
FCA has been cautious so far
Rishi Sunak, the Chancellor of the Exchequer, indicated in a speech on Nov. 9, 2020, that stablecoins and central-bank digital currencies could provide more efficient payment processing networks.
The U.K. 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. 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 U.K., 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. We aren’t going to lower our standards, but we are going to sustain our technological neutral approach.”
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 U.K. government regarding the crypto industry.
Stablecoin regulation is set to move forward in the U.S.
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, U.S.A., 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.
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