In a sign of potential cryptocurrency regulation, the British Treasury is beginning planning on a proposal to regulate stablecoins following their initial request for feedback in Spring 2021. Tolga Akmen details the plan in Vice:
“In April 2022, the government published a response to the consultation saying it intended to push forward legislation that would regulate stablecoins by ‘amending existing electronic money and payments legislation.” This response also acknowledged, however, that any framework would need to account for the risks posed by the collapse of a stablecoin firm that served as a “systemic payment system” or was a “service provider of systemic importance.’”
In their response, the British government acknowledges that failing stablecoins could disrupt broader economic stability and would instruct the Bank of England power to take over failing currencies:
“The Treasury says that an amended Financial Market Infrastructure Special Administration Regime (FMI SAR) would be the most appropriate way to deal with such a failure. In short, FMI SAR gives the Bank of England the power to oversee and direct the actions of a payment firm to ensure that their services continue in the event of a failure that could destabilize the economy.”
Any proposal would be sent to Parliament after August 2 and considered when time allows. The actions of the British Treasury add to recent comments by U.S. Treasury Secretary Janet Yellen, that the U.S. Treasury would also be looking into regulatory controls spurred by the collapse of algorithmic stablecoin UST in May.
Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group