United Kingdom Eyes Legalization of Stablecoins Despite Recent Crash

Stablecoins — cryptocurrencies where the value is tied to another currency, commodity, or financial instrument — are expected to be legalized as a form of payment in the United Kingdom, according to Her Majesty’s Treasury, following the announcement of Prince Charles during the Queen’s speech.

“A bill will be brought forward to further strengthen powers to tackle illicit finance, reduce economic crime and help businesses grow,” explained Prince Charles. Earlier in April, the United Kingdom’s Economic and Finance Ministry noted that it will be amending its existing regulatory framework in an effort to incorporate stablecoins as a form of payment. “This places the UK financial services sector at the forefront of technology, creating conditions for stablecoin issuers and service providers to operate and invest,” tweeted the official account of Her Majesty’s Treasury on April 4.

The move, however, came as a surprise to the general crypto community, particularly in light of the recent TerraUSD (UST) crash — a prominent algorithmic stablecoin — which was expected to raise a number of red flags among regulators. The Treasury noted that it is eyeing to legalize 1:1 fully-backed stablecoins similar to Tether (USDT) or USD Coin (USDC) instead of algorithmic stablecoins.

“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,” elaborated Chancellor of HM Treasury Rishi Sunak. “The Government has been clear that certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto-assets.”

Through the legalization of stablecoins, the U.K. introduce emerging financial technologies which will be geared to promote growth opportunities while ensuring financial stability. United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce, on the other hand, also pointed out that a regulatory framework for stablecoins is necessary, especially as interest among regulators continues to rise.

“We need to allow room for there to be failure because that obviously is part of trying new things and our framework really does allow for that kind of trial and error. I hope that we will use it for that purpose,” said Peirce, urging the SEC to provide exemptions to particular technologies.

Source: CoinTelegraph