According to reports, the UK Treasury has decided to continue regulating stablecoins as legal tender. This decision was greeted with mixed feelings by the crypto community. This is mainly due to the recent decline 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 the UK. This was revealed during the Queen’s Speech. During the speech, Prince Charles announced the introduction of new laws 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) is being introduced to further strengthen the powers to combat illegal financing, reduce economic crime and support business growth.“
The Ministry of Finance wants to regulate 1:1 supported stablecoins
Recently, the entire Terra ecosystem collapsed, with LUNA and UST probably crashing irreparably. This is likely to set off some alarm bells among regulators. Nevertheless, 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 Ministry of Finance’s plan does not legalize algorithmic stablecoins. It prefers 1:1 fully supported stablecoins such as Tether (USDT) or USD Coin (USDC). The spokesman of the Ministry of Finance said:
“The legislation regulating stablecoins when used as a means of payment will be part of the Financial Services and Markets Act announced in the Queen’s Speech.“
The goal of the Ministry of Finance is to create opportunities for growth and at the same time ensure financial stability in the introduction of new financial technologies. It therefore sees 1:1 stablecoins as the perfect option to contribute to this. However, the value of TerraUSD was pegged to another cryptocurrency, which the speaker commented as follows:
“The government has made it clear that certain stablecoins are not suitable for payment purposes because they share properties with unsecured crypto assets.“
The SEC is behind the UK Treasury
The Commissioner of the United States Securities and Exchange Commission (SEC), Hester Peirce, recently stressed the need to have room to fail while supporting a regulatory framework for stablecoins. Peirce said on Twitter:
“I would like to talk about how the SEC’s regulatory goals can be achieved without hindering the trial-and-error principle, which is so important for innovation.“
Peirce also addressed the regulators’ interest in stablecoins in a speech to an online panel. She urged the SEC to make exceptions for certain technologies that would allow it to conduct the necessary experiments. She said at the time:
“We have to leave room for mistakes, because that’s part of trying new things, of course, and our framework really allows for this kind of trial-and-error. I hope we will use it for this.“