The Treasury says it will only legalize fully backed stablecoins.
As the crypto world assesses the fallout from last week’s collapse in the Terra ecosystem, the UK Treasury has confirmed that its plans to regulate stablecoins as legal tender remain in place.
The announcement reaffirmed Her Majesty’s Treasury’s commitment to supporting financial innovation across the country.
The department confirmed that legalizing stablecoins for payments was included in the financial legislation portion of the Queen’s Speech. The Prince of Wales explained that across the nation the government is introducing a range of measures to raise living standards and encourage economic growth.
The Economic Crime and Corporate Transparency Act will be central to those efforts, strengthening the powers of law enforcement to tackle illicit finance and reduce economic crime, which in turn will help businesses to grow, the Prince said.
Last month, the UK’s Department for Business and Finance confirmed the legal framework would be changed to accommodate the use of stablecoins. However, confidence in that legislation was shaken when markets tumbled following the failure of LUNA and UST during Terra’s collapse, which affected one of the most widely used stablecoin models.
Chancellor Rishi Sunak indicated that last week’s events would not change the government’s plans, adding that the government will take all necessary steps to ensure the UK’s financial services remain at the forefront of technology and innovation.
A Treasury spokesperson emphasized that the UK will not legalize payments using “algorithmic stablecoins” like Terra. Instead, the focus will be on fully backed, 1:1 stablecoins such as USDT and USDC:
“The government has been clear that certain stablecoins are not suitable for payment purposes because they share characteristics with unsupported crypto assets.”
“We will continue to monitor the wider crypto-asset market and stand ready to take further regulatory action if necessary.”