UK en-route to legalize stable coins following Terra collapse
The UK Treasury Department has reportedly decided to continue regulating stablecoins as legal tender. This decision was welcomed by the crypto community with mixed feelings. This is mainly due to the recent fall of one of the most popular algorithmic stablecoins, TerraUSD (UST).
A local report by The Telegraph highlighted the Treasury’s intention to regulate stablecoins across Britain. This was revealed during the Queen’s Speech. During the speech, Prince Charles announced the introduction of new legislation in several sectors, including measures to stimulate economic growth to improve living standards in the region. He added:
“A bill (Economic Crime and Business Transparency Bill) will be introduced to further strengthen powers to tackle illegal financing, reduce economic crime and help businesses grow.”
The Treasury wants to regulate 1:1 supported stablecoins
Recently, the entire Terra ecosystem went down, with LUNA and UST likely crashing beyond repair. This is expected to raise some red flags with regulators. Still, the Treasury remains on track to ensure that the UK financial services industry is always at the forefront of technology and innovation. The latter was previously mentioned by the Chancellor, Rishi Sunak.
However, the Treasury’s plan does not legalize algorithmic stablecoins. It prefers 1:1 fully supported stablecoins such as Tether (USDT) or USD Coin (USDC). The Treasury spokesperson had this to say:
“Legislation to regulate stablecoins where used as means of payment will be part of the Financial Services and Markets Bill announced in the Queen’s Speech.”
The Treasury aims to create growth opportunities while ensuring financial stability when introducing new financial technologies. It therefore sees 1:1 stablecoins as the perfect option to contribute to this. However, TerraUSD’s value was pegged to another cryptocurrency, which the spokesperson had the following to say:
“The government has been clear that certain stablecoins are not suitable for payment purposes, as they share characteristics with unbacked crypto assets.”
The SEC is behind the UK Treasury
United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce recently emphasized the need to have room to fail while supporting a regulatory framework for stablecoins. Peirce said on Twitter:
“I’d be happy to talk about how to achieve the SEC’s regulatory objectives without impeding the trial and error that is so essential to innovation.”
Peirce also addressed the interest in stablecoins among regulators in a speech to an online panel. She urged the SEC to make exceptions for certain technologies, which would allow her to conduct the necessary experiments. She said at the time:
“We have to leave room for failure because of course that’s part of trying new things and our framework really allows for that kind of trial and error. I hope we will use it for that.”