The UK Treasury has reportedly decided to continue to make stablecoins legal tender. This decision was greeted by the crypto community with mixed feelings. This is mainly due to the recent crash of one of the most popular algorithmic stablecoins, TerraUSD (UST).
A local report by The Telegraph highlights the Treasury’s intention to regulate stablecoins across the UK. This was revealed during the Queen’s Speech. During his speech, Prince Charles announced the introduction of new laws in several sectors, including measures to stimulate economic growth in order to raise living standards in the region. He added:
“A bill (Economic Crime and Business Transparency Bill) will be introduced to further increase power in tackling illicit finance, reduce economic crime and help businesses grow.”
Treasury wants to regulate 1:1 backed stablecoins
Recently, the entire Terra ecosystem collapsed, with LUNA and UST most likely unable to recover. This is expected to be a sign for regulators. However, the Treasury remains on track to ensure that the UK financial services industry is always at the forefront of technology and innovation. This was previously mentioned by the Chancellor, Rishi Sunak.
However, the Treasury’s plan is not to legalize algorithmic stablecoins. They prefer 1:1 fully backed stablecoins like Tether (USDT) or USD Coin (USDC). A spokeswoman for the Ministry of Finance had this to say:
“The law to make stablecoins a means of payment will be part of the Financial Services and Markets Bill announced in the Queen’s Speech.”
The Ministry of Finance aims to create growth opportunities while ensuring financial stability when introducing new financial technologies. Therefore, the 1:1 Stablecoin is considered a perfect choice to contribute to this. However, the value of TerraUSD is pegged to other cryptocurrencies, a spokesperson said as follows:
“The government has made it clear that certain stablecoins are not suitable for payment purposes, as they share the same characteristics as unsupported crypto assets.”
The SEC is behind the UK Treasury
United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce recently stressed the need to prepare for failure while supporting the regulatory framework for stablecoins. Pierce said on Twitter:
“I would be happy to talk about how to achieve the SEC’s regulatory goals without getting in the way of the pilot effort that is so critical to innovation.”
Peirce also discussed interest in stablecoins among regulators in his address to the panel on line. He urged the SEC to make exceptions to certain technologies, which would allow him to carry out the necessary experiments. He said at the time:
“We have to be prepared to fail because of course it’s part of the act of trying new things and our framework really allows for such trials. I hope we will use it for that.”