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UK government to focus on stablecoins first for regulation: minister

CryptoWhale
CryptoWhale
According to government officials, The United Kingdom plans to focus initially on regulating stable coins, before moving to tackle the wider digital currency sector.
Financial services Minister John Glen said the U.K. government would target stable coins in order to prevent threats to competition, in a bid to prevent any single private player from coming to dominate the market, Reuters reported.
In particular, it is thought the minister was referring to Tether, the controversial stable coin which has more volume than any other cryptocurrency on the market, and has doubled in size over the last few months. This comes after NYAG investigators recently confirmed Tether wasn’t backed by the dollar, deceived investors, and covered up massive losses.
Tether is currently the most “valuable” company in the world that hasn’t complete a single audit in their 7+ year existence. With no current limitations to how long they can continue their fraud, regulators are rightfully going after them first.
Addressing a City & Financial conference, the minister said that while there was a case for intervention in the wider digital currency markets, private stablecoins were a more immediate target.
“We need to manage risks to competition. There is the potential for some firms to swiftly achieve dominance and crowd out other players, due to their ability to scale and plug into existing online services. We believe the case for intervention in the wider cryptocurrency markets is less immediately pressing.”
On blockchain technology, Glen said the U.K. government would take steps to encourage innovation and collaboration on new technologies, in a bid to strengthen this emerging sector of the economy.
“We have a once-in-a-generation opportunity here to make vast strides in the efficiency of financial services, and ultimately benefit consumers and the economy as a whole,” according to the official.
Stablecoins have grown to become the largest component of global cryptocurrency trading volumes, allowing for the utility of on-chain payments and settlement without the exchange risk of public digital currencies.
With private interests such as Facebook mobilizing to launch their own stablecoins, governments in the U.K. and elsewhere are increasingly turning their focus to regulating this emerging market.
U.S Stable Coin Regulations
The UK isn’t the only one with eyes on Stable Coins. In 2020, three U.S. congressional representatives proposed The Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act.
This act requires stablecoin-issuing companies to obtain a banking charter and follow “appropriate” banking regulations in their jurisdiction.
It also requires them to maintain reserves, equivalent to the dollar amount of their stablecoin issues, at the Federal Reserve and undergo regular audits to ensure compliance.
Impact of Stable Coin Regulations
It’s necessary that government agencies tackle the systemic risks that come from unregulated companies currently operating beyond any government oversight.
Many Stable Coins haven’t provided sufficient evidence to show they are backed, and with the billions in daily volume, this could be catastrophic unless someone steps in and makes sure they’re operating legally.
It’s unclear when exactly the UK or US government will enact regulations on Stable Coins, but this news will have a positive impact on the greater cryptocurrency community, despite many Stable Coin issuers falsely claiming it’s a “huge step backwards”.
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