UK to introduce bill to regulate stablecoins

UK to introduce bill to regulate stablecoins

On July 19, Nadhim Zahawi, the chancellor of the Exchequer, said the government will introduce a bill to set out how stablecoins can be used as payment.

The bill follows the commitment of the Treasury to explore measures designed to enhance the competitiveness of the U.K. tax system regarding cryptocurrencies, study the legal status of DAOs, and launch a market infrastructure sandbox for digital firms in 2023.

The move comes as regulatory agencies around the US continue to grapple with the challenges and opportunities of digital tokens pegged to reserve currencies like the U.S. dollar and algorithmic stablecoins that are more opaque.

The Terra ecosystem collapsed in May, after its algorithmic stablecoin, UST, slipped its peg and cratered. The failure triggered a deep selloff in crypto markets and contributed to the failure of other significant players, including Three Arrows Capital, the $10 billion hedge fund that recently declared bankruptcy. Janet Yelles, the CEO of the U.S. Treasury Department, has asked Congress to introduce legislation this year as a part of a crackdown on stablecoins.

The U.K., known for its 'light touch' approach to financial regulation, has taken a softer stance. The U.K. Treasury declared stable tokens a 'valid form of payment' in April.

Stablecoin issuers seem to be gearing up for the U.K.'s pro-stablecoin shift.

Blackfridge, a fintech firm in the island of Man, launched its own GBP-tracking stablecoin, Poundtoken, on July 11 in response to a surge in British demand for a stablecoin. The token is purportedly supported by GBP, with the firm claiming to have appointed KPMG to provide monthly attestations demonstrating its reserves.