Expedited Regulation Process for Stablecoins Demanded Following Market’s Collapse
Following the catastrophic collapse of Terra’s UST stablecoin last week, which caused many digital assets like Bitcoin and Ethereum to plummet, many governments are stepping in and implementing regulations for stablecoins.
Regulation is already widely discussed within the space following the U.S. Securities and Exchange Commission’s (SEC) digital asset regulation initiatives announcement. However, the recent crash has led to many feeling the process should be expedited, especially surrounding stablecoins.
The U.K. has taken action and announced its plans to receive regulation for stablecoins. The Treasury confirmed plans to regulate stablecoins as a form of payment in a new bill.
The Treasury expanded on its commitment to digital asset adoption, which was touched on in the Queen’s Speech to parliament on May 10. During the speech, plans to put a regulatory framework around stablecoins were mentioned. A spokesperson elaborated further saying: “Legislation to regulate stablecoins, where used as a means of payment, will be part of the Financial Services and Markets Bill, which was announced in the Queen’s Speech.”
On the other side of the pond, a top official at the U.S. SEC stated that stricter rules around stablecoins could be drawing closer. Many agency members came out and spoke on the need to get the ball rolling on regulation to prevent another issue akin to the one seen last week.
U.K. Treasury’s Plans for Stablecoin Regulation
While the U.S. government is pushing more towards general efforts to regulate stablecoins following the collapse of UST, the U.K. government’s new legislation will only deal with collateral-backed stablecoins such as Tether’s USDT and Circle’s USDC. The Treasury made a statement saying that “certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto assets,” which is assumed to be in reference to algorithmic stablecoins such as UST.
Even after the massive hit taken by the digital asset space following last week’s collapse, U.K. officials have maintained their optimism surrounding blockchain technology. The Treasury explained that the planned stablecoin legislation will “create the conditions for issuers and service providers to operate and grow in the U.K., whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely.”
The soon-to-be-implemented stablecoin legislation will be a part of the U.K.’s new Financial Services and Markets Bill. This new bill was designed to strengthen the U.K.’s financial services industry and create an accessible, easy-to-understand, and internationally respected approach to financial services regulation.
More details will be released for the bill when formally introduced by the Treasury later this year.
The U.S. SEC’s Call for an Expedited Regulation Process
Members of the U.S. SEC came forward last week following the crash of UST to urge the government to speed the process of regulation around stablecoins.
SEC Commissioner Hester Pierce spoke on tighter restrictions during an online panel debate stating: “One place we might see some movement is around stablecoins. That’s an area that has obviously this week gotten a lot of attention,” touching on the potential stablecoins can have future use in the marketplace builds. Pierce believes that this provides an excellent opportunity for the SEC to capture digital assets and the exchanges they are traded on under the agency’s broad rulemaking authority.
Gary Gensler, chair of the SEC, stated that the agency should address stablecoin risks due to the concerns surrounding financial stability and monetary policy presented by asset-linked digital assets. The concerns come from features that mirror and could possibly compete with bank deposits and money market funds. He also touched on the issues regarding the potential of illicit activity.
It has yet to be seen what the SEC and U.S. government will do to help expedite the regulation process, as it may conflict with their initial plans.
Writer, content marketing at Netcoins.