Dollar-backed stable coin Tether to be pegged to pound

A stable coin will be pegged to the British pound next month, a move that comes as London draws up plans to regulate the fast-growing type of digital currency.

Stable coin is designed to keep a steady value against traditional currencies or commodities such as gold. They try to avoid the volatility that makes bitcoin and other digital tokens unpractical for most commerce.

Last month, the value of terraUSD, a stable coin that used a complex algorithm, collapsed, sparking a spotlight on the importance of stable coin in the trading world.

The British Virgin Islands-based Tether's dollar-pegged stable coin is the third largest market cap by market value, with some $68 billion in circulation.

It is the primary medium for moving funds between criptocurrency and regular cash. Its token is underpinned by a mixture of dollars, government debt and short-term debt issued by companies.

Tether broke its 1: 1 peg with the dollar after the demise of terraUSD caused a sell-off in the criptocurrency market.

Britain plans to bring some stablecoins under the supervision of regulators, part of a plan to exploit the potential of cryptocurrencies andBlockchain technology to help consumers make payments more efficiently.

It will adapt existing rules in May to deal with major stable coin collapses.

In a statement, Tether Chief Technology Officer Paolo Ardoino said that the company would work with UK regulators to make sure the United Kingdom is the next frontier for cryptocurrencies innovation and the wider implementation of the technology for financial markets.

Britain's finance ministry did not respond to a request for comment.

In addition to its dollar-backed coin, Tether offers token that can be pegged to the euro, Chinese yuan and Mexican peso.