The UK Treasury has launched a public consultation on the regulation of cryptoassets and stablecoins. According to the Treasury, the idea is to collect information to base a “broader regulatory approach” to cryptoassets and stablecoins.
At the introduction of the consultation, John Glen, member of Parliament and Secretary of the Treasury Economics Affairs, argues that stablecoins can “pave the way for faster and cheaper payments”. And he reckons it makes it easier for people to pay for things and save their resources.
However, Glen points out that there may be risks as well, with the potential to affect both consumers and the financial system. For such reason, it has become essential to discuss this regulation.
Therefore, the priority has become “to ensure that regulation supports the safe use of stablecoins”, he says. “The government will continue to actively monitor new risks and those that arise as this market continues to mature”.
UK consultation leaves out stablecoins based on algorithms
The Treasury says the government wants to ensure that regulation is “proportionate” and focus “where the risks and opportunities are most acute”. As for cryptoassets, the UK assesses that this type of asset is very volatile, so it is not reliable for use as a means of payment. On the bright side, the authority says it wants rules that allow “responsible innovation to occur”.
Regarding stablecoins, the UK first suggests adopting rules for “stable tokens” in payments. “This would cover companies issuing stable tokens and companies providing services to them, both directly and indirectly, to consumers”.
However, this definition leaves out stablecoins that are based on algorithms. As the text explains, they “seek to maintain a stable value through the use of algorithms to control the stock” of the cryptocurrency. But they do not have a backing asset. Thus, given the risks of stability, they “may not be suitable for retail or wholesale transactions”.
Subsequently, the government will evaluate the possibility of including more players in the crypto asset market or tokens in the authorization system. The consultation process began on January 7, and it is possible to participate until March 21.