The UK Government has announced moves that will see ‘stablecoins’ recognised as a valid form of payment in what it claims are part of wider plans to make Britain a global hub for cryptoasset technology and investment. But are really the beginning of Government overreach into the crypto asset industry, and the start of UK Government plans to move away from cash and card payments, and into a digitalised pound.
Stablecoins are a form of cryptoasset that are typically pegged to a fiat currency such as the dollar and are intended to maintain a stable value. The Treasury claims that “with appropriate regulation, they could provide a more efficient means of payment and widen consumer choice”.
The Government intends to legislate to bring stablecoins – where used as a means of payment – within the payments regulatory perimeter, under the guise of creating conditions for stablecoins issuers and service providers to operate and invest in the UK.
The Government claims that “by recognising the potential of this technology and regulating it now, we can ensure financial stability and high regulatory standards so that these new technologies can ultimately be used both reliably and safely”.
The UK’s vision for being a “global hub for cryptoasset technology” was set out in a speech by the Economic Secretary to the Treasury, John Glen at the Innovate Finance Global Summit on Monday April 4th 2022.
He also announced that the UK will proactively explore the potentially transformative benefits of Distributed Ledger Technology (DLT) in UK financial markets, which enables data to be synchronized and shared in a decentralised way.
The Government will legislate to establish a financial market infrastructure (FMI) ’Sandbox’ that will enable firms to experiment and innovate in providing the infrastructure services that underpin markets, in particular by enabling Distributed Ledger Technology to be tested. The government further confirmed that it will initiate a research programme to explore the feasibility and potential benefits of using DLT for sovereign debt instruments.