In February, the UK government released a consultation document on its proposed approach to stablecoin regulation. The government realized earlier enough that the rapidly developing decentralized ledger technology (DLT) could impact several industries.
According to the Treasury documents, stablecoins could make way for quicker, affordable payments, hence, making it easier to make online payments and store money. A consultation is the preliminary stage of a regulatory process and is aimed at maximizing transparency.
However, the British government has also identified competition as a major threat. Therefore, its focus is first on stablecoin regulation before moving to the whole crypto market. The consultation covers both issuers and retail stabelcoins.
An instance of the government’s fears was when Facebook Inc. moved to introduce its stablecoin Diem in 2019, formerly Libra. This caused a lot of concerns for the authorities knowing they could easily push out other competitors due to their ability to scale.
The UK consultation has been broadly viewed as a step towards the mitigation of risks posed by digital assets while also maximizing their potentials. Generally, the approach has been considered flexible and as an impetus for better financial inclusion.
Stablecoin Regulation Could Initiate a Broader Crypto Regulation
According to John Glen, the UK financial service minister, the country will not hesitate to be “protectionist” regarding the DLT. Alex Roy, the head of consumer distribution policy also added that it would be incongruous to enforce the extant “e-money” rules on stablecoins.
The e-money rule was also discussed in the consultation documents released by the British government. However, the country has made its stance clear that its regulation will be focused on stablecoins before moving on to other crypto assets.
The US regulatory counterpart also made a similar move towards stablecoin regulation but has been criticized by many. This attracted much disapproval from the public because it aims at restricting its issuance to chartered banks alone.