- With the collapse of the UST and LUNC, having an adequate regulatory framework for digital assets has become an urgent matter, not only in the UK but also in other jurisdictions.
- By monitoring stablecoin issuers, the UK hopes to ensure economic and financial stability and prevent investors from losing their investments.
The UK has become the latest country to express concern over the stability of stablecoins and call for regulation. This echoes the sentiments of the European Union and the US Consumer Financial Protection Agency, both of which cast doubt on the long-term stability of these digital assets.
The authorities consultation form We hope that proper regulation, as they announced, will create a beneficial environment for investors and stablecoin issuers.
Regulatory Necessity Suggests Approval for This Digital Asset Class
The recent recognition by UK regulators of the potential of stablecoins and their ability to be used as a means of payment settlement has prompted regulation across the crypto sector.
To some extent, this is also a sign that authorities prefer regulation over outright ban. Through a consultation paper, the UK Treasury has praised the progress made in driving crypto innovation and recognizing crypto stablecoins as a means of payment.
Use of SAR could work towards achieving much-needed order
There are currently two special management regimes in the UK to ensure that investors are protected in the event of a payment company’s bankruptcy. These are the Financial Market Infrastructure SAR (FMI SAR) and the Payments and Electronic Money Special Control Scheme (PESAR).
The FMI SAR was created to mitigate the risks associated with a possible collapse of the payment system, known as a systemic. The consultation document claims he is an FMI SAR supporter and that the government intends to enact legislation when Congress has time. The Bank of England, if the FMI SAR is adopted, will be given control over management, allowing businesses to focus primarily on continuity of service.
Indeed, Terra’s demise has had an impact on the stablecoin and cryptocurrency industries. This is largely what has spurred rapid regulatory action by authorities around the world.
