- The UK Treasury is set to legalize stablecoins as a means of payment despite the collapse of TerraUSD (UST).
- Following the collapse of the UST, the Treasury plans to legalize fully collateralized stablecoins such as Tether (USDT) and USD Coin (USDC).
- The UK government is looking to spur innovation while other jurisdictions continue to hamper growth in the space.
In April, UK Economics Secretary John Glen announced plans to include stablecoins as a form of payment.
Taking to Twitter, Glen said:
“It puts the UK financial services industry at the forefront of technology, creating the conditions for stablecoin issuers and service providers to operate and invest.”
Economic Secretary @JohnGlenUK today announced that stablecoins will be incorporated into UK payments regulations.
This puts the UK financial services industry at the forefront of technology, creating the conditions for stablecoin issuers and service providers to operate and invest. pic.twitter.com/14SsIGW5bf
— Her Majesty’s Treasury (@hmtreasury) April 4, 2022
Since the April announcement, the Queen has given her blessing to stablecoins during the Queen’s speech in the House of Lords.
Speaking on behalf of the Queen, Prince Charles gave his support to plans to legalize stablecoins as a form of payment.
The British Treasury will legalize stablecoins as a means of payment
According to a report from the weekend, the UK Treasury is considering legalizing stablecoins as a form of payment.
Chancellor Rishi Sunak said it would,
“Make sure the UK financial services industry is always at the forefront of technology and innovation.”
A UK Treasury spokesperson said:
“Legislation to regulate stablecoins, when used as a means of payment, will form part of the Financial Services and Markets Bill, which was announced in the Queen’s Speech.”
The news follows a tumultuous week for stablecoins and the crypto market. Stablecoin TerraUSD (UST) saw its dollar peg broken, with the UST falling to a weekly low of $0.0437 before stabilizing.
The collapse left Terra LUNA near zero, with $500 billion wiped out of the total crypto market cap before support took effect.
A key difference, however, is that the government plans to legalize stablecoins fully backed by currency reserves and other liquid assets. These include Tether (USDT) and USD Coin (USDC).
Stablecoin TerraUSD is tied to Terra LUNA via a failed algorithm, causing both to collapse.
While TerraUSD and Terra LUNA grabbed headlines last week, Tether also added to market stress.
On Thursday, Tether fell to a daily low of $0.9511 before recovering to near parity against the dollar. The fall in the parity raised fears of another collapse of the stablecoin before returning to levels of $0.99. Tether saw a similar move on Sunday, falling to a weekly low of $0.9408 before stabilizing.
Markets were less concerned with Sunday’s drop, however, which was modest compared to the current year low of February 28 of $0.8679.
As the UK seeks to legalize stablecoins as a means of payment, US lawmakers seem divided.
US Treasury Secretary Yellen calls for more regulatory oversight
Amid the crypto market turmoil last week, US lawmakers delivered a different message on the crypto front.
US Treasury Secretary Janet Yellen has called for crypto regulation while noting that dollar-pegged stablecoins have yet to reach a scale “where they pose financial stability issues.”
SEC Chairman Gary Gensler took the opportunity to lay claim to the crypto market rather than supporting innovation.
As governments and regulators grapple with the need for regulatory oversight and support for innovation, some are further ahead than others.
Dubai is one jurisdiction that has taken the lead in supporting innovation in the digital space. Earlier this month, Dubai’s virtual assets regulator became the first to enter the Metaverse with a virtual seat.