The British Treasury is foregoing with its plans to create a new regulatory framework for stablecoins as a form of payment currency amid last week’s crypto crash.
Announced during the Queen’s Speech, the Treasury will look to regulate crypto stablecoins as a part of its financial legislation. This comes in light after the Terra Luna stablecoin crashed, seeing its valuation fall as low as 98%, and causing widespread turbulence within the market.
Chancellor, Rishi Sunak, stated that he will “ensure the UK financial services industry is always at the forefront of technology and innovation”.
“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,” added a Treasury spokesman.
“This will create the conditions for issuers and service providers to operate and grow in the UK, whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely.
The crypto market saw one of the worst collapses in its recent history last week, as up to $300 billion was knocked off the total valuation of the market. Mainly as a result of Terra Luna’s collapse, the Treasury affirmed that ‘algorithm stablecoins’ such as Luna, will not be included in the legislation as they believe them to not be sustainable.
“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,” stated the Treasury spokesman.
Stablecoins remain a contentious debate between leading figures across the globe, highlighted further with the recent crash. Despite being labelled as unsustainable, many supporters of the cryptocurrency believe they have the ability to cut out cross-border transactions and become a lot more efficient than other regular cryptocurrencies.