UK Regulators to Bring Risk Management Laws In Case Stablecoin Projects Fail

The UK government has released an advisory paper outlining laws to mitigate the risks associated with stablecoin projects that fail. This development comes after the recent collapse of the Terra ecosystem. Now that the UK has recognized stablecoins as a legitimate alternative to payment, it aims to protect its citizens from the financial risks generally associated with the crypto industry. As part of its plans, the UK will give more control to the Bank of England (BoE) to deal with issuers of failed stablecoins.

“Since the initial commitment to regulating certain types of stablecoins, events in the crypto-asset markets have highlighted the need for appropriate regulation to help mitigate consumer risk, market safety, and financial stability,” the UK Treasury said in an official publication this week. .

The rules will include changes to the UK’s Financial Market Infrastructure Special Management System, also known as the FMI SAR.

The FMI SAR will update its framework for dealing with volatile stablecoin projects.

Should the stablecoin project threaten the country’s financial stability, the FMI SAR will be able to access the necessary insolvency arrangements.

“The failure of a Systematic Digital Settlement Asset (DSA) firm could have a wide range of financial stability as well as consumer protection effects. This could be in terms of the continuity of services critical to the running of the economy and individuals’ access to their money or assets,” added the publication published by the Kingdom’s Ministry of Treasury. United: “It will require further work to consider whether it is appropriate to develop a detailed legal framework for the failure of such companies and, if so, design them.”

In April, the UK added stablecoins to its financial system.

Stable coins like Tether and Binance USD are crypto assets that are tied to reserve assets like gold or fiat currencies, so even if the crypto market is down, they can still see gains due to the performance of the underlying assets.

The British government launched an advisory on crypto-assets and stablecoins last year, the results of which were announced at the Global Financial Summit by Britain’s Economy Minister, John Glenn.

Amidst the spread of crypto culture in the UK, financial regulators have consistently expressed concerns about economic instability that could leak out as a result of the UK’s overall exposure to cryptocurrencies.

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