The recent crash of Terra’s algorithmic stablecoin UST has caused a huge crisis for cryptocurrencies. Many are worried about the situation. It is in this context that the United Kingdom government has proposed additional security measures to be implemented to prevent collapses of stablecoins seriously harm future financial stability.
The UK government wants to secure the stablecoins
On May 31, 2022, an article was published by the UK government stating that current legislation needs to be changed in order to address the risk of potential failure of another stablecoin. This legislation would include empowering the Bank of England to oversee the administration of “systemically important failing stablecoin issuers”. Especially since England sees itself as a world center of cryptocurrencies and wishes to increase a state presence to secure this market which could make the country a land attracting cryptocurrency investors from all over the world.
A global concern for stablecoins
Furthermore, after the recent crash of TerraUSD (UST), regulators around the world are worried and now want to ensure that US dollar-backed stablecoins do not jeopardize global financial stability. Indeed, the TerraUSD crash erased $40 billion worth of not only UST tokens, but also LUNA, Terra’s first token.
A proposal submitted to the British Parliament
The proposal to be considered by the UK Parliament includes a call for appropriate regulation that will help soften the blow from a potential collapse of stablecoins consumers, market integrity and financial stability. The proposal states that the government should amend the IMF SAR (Financial Market Infrastructure Special Administration Regime) so that it includes all possible risks that may arise from defaults of issuers of stablecoins that are not registered as banks.
Apparently, according to this bill, the stablecoins which would present the most risk would be placed under the supervision of the country’s central bank: the Bank of England. While smaller projects would come under the jurisdiction of the Financial Conduct Authority (FCA). The fall of the UST shocked more than one. And England, which wants to become an attractive country in the cryptocurrency sector, seems to be one of the most worried. Albion has even planned to legislate to prevent a new disaster… The scam TerraUSD, this cursed stablecoin algorithmic, will it harm stablecoins classics, grandiose innovation coming to turn the world of centralized finance upside down? Would it not rather be a pretext for the stablecoins come under the control of the central bank? Doubt is allowed…
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UK wants to allow Bank of England to oversee stablecoins
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