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Yesterday (4 April 2022), the UK government announced that it will regulate stablecoins in order to accept them as a form of payment in the UK. The fact that stablecoins are “pegged” to underlying assets such as fiat currencies, treasury bills or commodities etc makes them less volatile than other cryptocurrencies and arguably therefore have the potential to play an important role in the future of global finance. However, similar to other cryptocurrencies, stablecoins are considered property but not recognised as “money” in the UK.
At this stage it is unclear which stablecoins will be considered and how they will be regulated. However, the move signifies the regulators’ changing attitude towards cryptocurrencies and promises more regulatory certainty for the UK’s cryptocurrencies specifically, and perhaps the cryptoassets market more widely. This move will help to boost the UK’s competitive edge in attracting global investment and talent to develop the industry.
The announcement is part of the government’s ambitious plan to make the UK a global cryptoasset technology hub. Other measures include:
- allowing innovators to experiment crypto infrastructure (including Distributed Ledger Technology) within a collaborative and safe environment of a “financial market infrastructure sandbox”. The potential of using DLT for sovereign debt instruments is on the government’s agenda when using the sandbox;
- making the UK tax system more competitive to the cryptoasset market, considering other “top jurisdictions” for cryptoassets have more favourable tax treatment for cryptoassets;
- working with the Royal Mint on a Non-Fungible Token this summer;
- organising a “CryptoSprint”, led by the FCA, to seek feedbacks from key industry stakeholders on the future of the crypto market in the UK. The event will be held for 2 days on 10 – 11 May 2022 and the registration will close by 20 April 2022.
The measures are a welcome change which will improve the market’s confidence in the future of the UK’s crypto industry, especially in light of the recent decision by the EU parliament to ensure crypto transactions are traceable, which will arguably have an adverse impact on the cryptoasset industry.
For more information on this article, please contact Suzie Miles.