Britain to reveal stablecoin regulation plans, sources say

British Prime Minister Rishi Sunak leaves at 11 Downing Street, in London, on March 23, 2022.

Daniel Leal | AFP | beautiful pictures

LONDON – The UK government will soon unveil a plan to regulate the cryptocurrency market, with a focus on a fast-growing token known as stablecoins, according to four industry sources familiar with the matter.

British Finance Secretary Rishi Sunak is expected to make an announcement in the coming weeks about a new regulatory regime for cryptocurrencies, the sources told CNBC, speaking on condition of anonymity because the information has not been made public.

The Treasury declined to comment when asked by CNBC about the plan.

The details of the plans are still being worked out, but sources who spoke to CNBC said they are potentially favorable for the industry, providing regulatory clarity for an area that has hitherto been largely ignored. there is no regulation yet.

According to sources, Treasury officials have shown a willingness to understand the intricacies of the cryptocurrency market and so-called stablecoins, digital assets that derive value from existing currencies such as U.S. dollar.

The ministry has been in discussions with a number of companies and trade groups. That includes the Winklevoss brothers’ crypto exchange Gemini, one of the sources said. Gemini issues its own stablecoin called the Gemini dollar, which is pegged to the US dollar.

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Stablecoins have seen exponential growth in usage over the past few years, in tandem with growing interest in cryptocurrencies. Tether, the world’s largest stablecoin, now has a total circulating supply of more than $80 billion — up from about $4 billion two years ago.

But those tokens have also caused concern among regulators, who worry that they may not be fully backed by an equivalent amount of reserves and are being used for money laundering and other activities. other illegal activities.

Meanwhile, regulators worry about the possibility that the financial system could be affected by bitcoin and other digital currencies, as well as the ability to use them to evade sanctions imposed on Russia in the wake of its invasion of Ukraine.

Financial stability risk

The Bank of England on Thursday urged policymakers to expand its regulatory framework to limit the risks posed by cryptocurrencies to financial stability.

BOE Deputy Governor Sam Woods wrote a alphabet The executives of several banks say that there has been “increased interest” from banks and investment firms in “entering different crypto markets.”

The Treasury move is being seen as a response to President Joe Biden executive order The sources said that calls for coordination from various US federal agencies on the regulation of cryptocurrencies. Some in the industry have complained about the lack of similar action from the UK

Several companies, including Revolut, and Copper could be forced to shut down their crypto operations in the UK this week if they don’t make it to the Financial Conduct Authority’s cryptographic register in time for the March 31 deadline.

The FCA said “a large number” of crypto businesses do not meet the required anti-money laundering standards. Only 33 companies have registered. More than 80% of companies assessed by the regulator have withdrawn their applications or been rejected.

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