British Treasury rules out legalising algorithmic stablecoins

The British Treasury will include regulation of stablecoins as a payment mechanism in the Financial Services and Markets Bill. The Telegraph reports.

The publication quotes a Treasury spokesman who indicated that the decision to amend the document was announced in speech by Queen Elizabeth II on 10 May 2022.

In the address, Prince Charles spoke of introducing new legal norms across various sectors and measures to stimulate economic growth to raise living standards in the region.

“A bill will be introduced to further strengthen powers to combat illicit financing, reduce economic crime and promote business growth,” the statement said.

The Treasury will not include in the document algorithmic stablecoins, as they “do not guarantee stability”.

“The Government has made clear that some stablecoins are not suitable for payments because they share characteristics with unsecured crypto assets. We will continue to monitor the broader cryptoasset market and stand ready to take further regulatory action if required,” the regulator’s statement said.

On May 8, the algorithmic stablecoin TerraUSD (UST) lost its peg to the US dollar. This occurred amid outflows from the Anchor protocol as the deposit yield was cut to 17.87%.

On May 10, the asset’s price fell below $0.62. The decline continued on May 11, after which the cryptocurrency used to mint UST, LUNA, slumped to $0.3. As of writing, UST trades around $0.08, and LUNA at $0.0002 (CoinGecko).

In the evening of May 15, another algorithmic stablecoin — DEI from the Deus Finance DAO project — lost its peg to the US dollar.

Earlier, the Treasury announced plans to legalise stablecoins and to issue its own NFTs. The move is intended to position the United Kingdom as crypto-friendly jurisdiction.

Earlier, the Bank of England published framework principles for the formation of the regulatory framework for cryptocurrencies, with a focus on future risks to financial stability.

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