Her Majesty’s Treasury (Exchequer) will move forward with a proposal to regulate stablecoins based on the financial regulations established in the Queen’s speech on May 10, 2022.
The UK Treasury has stated that it is open to stablecoin regulation for payment purposes, but that algorithmic stablecoins would not be included because they do not ensure stability.
Only stablecoins that are tied to a fiat currency will be considered. This statement corresponds to the queen’s son Prince Charles’ speech on Tuesday, which included fiscal themes.
A spokesperson from the Exchequer said:
“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. 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 problem that many Britons are experiencing as a result of the pandemic, with inflation reaching 10% and high energy prices.
In a speech on Nov. 9, 2020, Chancellor of the Exchequer Rishi Sunak suggested that stablecoins and central-bank digital currencies may improve payment processing networks.
Stablecoins will be regulated by the Financial Conduct Authority if the UK government adapts existing legislation governing electronic money to meet stablecoins.
So far, the watchdog has erred on the side of caution by permitting only a small number of cryptocurrency operators to set up shop in the United Kingdom, forcing other businesses with insufficient AML checks to operate overseas.
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 the “UK financial services industry to be at the forefront of technology and innovation at all times.” Sunak commissioned the Royal Mint to create a non-fungible token (NFT) by summer 2022 to reflect the UK government’s forward-thinking stance to the crypto industry earlier this year.
The recent demise of the Terra and LUNA algorithmic stablecoins has cast a veil on what was once thought to be a safe sanctuary for crypto enthusiasts to park their funds.
US Senator Pat Toomey of Pennsylvania, has called on the federal government to regulate stablecoins in the aftermath of Terra’s “bank run,” which drained the company’s liquidity reserves and sent shockwaves through the crypto market as substantial selloffs occurred.
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