Terra Collapse: the UK announces moves to legalize stable coins
The UK Treasury Department has chosen to continue classifying stablecoins as legal money. The cryptocurrency community was divided in its reaction to the news.
This is due to recent decreases in one of the most popular algorithmic stablecoins, TerraUSD (UST).
According to The Telegraph, the Treasury plans to regulate digital currencies across the United Kingdom. This was made known during the Queen’s Speech.
During his address, Prince Charles reveals that new legislation will be implemented in some industries, including policies intended to increase economic growth and improve people’s lives. He says:
“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 is proposing to control 1:1 supported stablecoins
The entire Terra ecosystem recently crashed, with LUNA and UST likely succumbing to catastrophic failure. Regulators will undoubtedly raise some concerns as a result of this.
Still, the Treasury is committed to ensuring that the UK financial services sector remains ahead of the curve; in terms of technology and innovation. The Chancellor has previously mentioned it himself.
However, the Treasury’s strategy does not legalize algorithmic stablecoins. Fully supported stablecoins such as Tether (USDT) or USD Coin (USDC) are preferred by the Treasury over 1:1 fully backed stablecoins like Bitcoin or Ethereum. The Treasury official states the following:
“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.”
When new financial technology is introduced, the Treasury aims to offer growth prospects while at the same time maintaining financial stability.
As a consequence, 1:1 stablecoins are seen as an excellent way to help contribute to this goal. TerraUSD’s value was instead linked to another cryptocurrency, according to the spokesperson, who says:
“The government has made it clear that certain stablecoins are not appropriate for payment use because they resemble unbacked crypto assets.”
The SEC is cooperating with the UK Treasury
Commissioner Hester Peirce of the United States Securities and Exchange Commission (SEC). Recently emphasizes the need for room to fail, while maintaining a regulatory framework for stablecoins.
“While supporting a regulatory framework for stablecoins, Commissioner Peirce states on Twitter: ‘The need to have space to fail underpins any effective regulatory regime.’
“I’d be delighted to discuss how to meet the SEC’s regulatory objectives without stifling experimentation, which is so crucial to innovation.”
In an interview with CNBC, Peirce says that the SEC has been “asking a lot of questions” regarding stablecoins. She also addresses concerns among regulators during a speech to an internet discussion forum.
She requested that the SEC allow certain technologies to be exempt from regulation so that she may carry out the required research. Ms. Peirce states
“We have to leave room for failure because of course that’s part of trying new things and our framework allows for that kind of trial and error. I hope we will use it for that.”
“If we don’t allow experimentation, then we will stifle innovation. If we had tried to apply today’s rules to the internet back in the early 1990s, would there be an internet?”
The SEC has yet to respond to Peirce’s latest comments on stablecoins. However, the regulator is taking a more open-minded approach to these digital assets.
This is good news for the cryptocurrency industry, which has been subject to stringent regulation in recent years.
As stated above, this UK move is a positive development for the cryptocurrency industry. This will go a long way in restoring investors’ confidence in stablecoins.