The UK Treasury has reportedly decided to recognize stablecoins as legal tender. Although, the crypto community accepts the move well. It comes as a surprise given its proximity to the recent collapse of TerraUSD (UST). It is one of the most popular algorithmic stablecoins.
Meanwhile, the recent crash of the Terra ecosystem resulted in the unrecoverable loss of LUNA and UST. Though, it raised red flags among regulators. The U.K. Treasury remains committed to “ensuring the U.K. financial services industry is always at the forefront of technology and innovation”. This is what the Chancellor, Rishi Sunak, previously stated.
UK Treasury open to introducing new financial tech
The Treasury’s intention to regulate stablecoins across the U.K. was revealed during the Queen’s Speech, according to a local report from The Telegraph. During his speech, Prince Charles announced the passage of new legislation in a variety of sectors, including measures to spur economic growth and raise living standards in the region.
The Treasury’s proposal, however, does not include legalizing algorithmic stablecoins, instead preferring 1:1 fully-backed stablecoins such as Tether (USDT) or USD Coin (USDC).
Rising interest in stablecoins
The Treasury hopes that legalizing stablecoins across Britain would open up new economic potential while preserving financial stability as it adopts new financial technology. The fact that the value of Terra’s UST token was related to a different coin was highlighted.
“The Government has been clear that certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto assets,” a representative said.
While supporting a legal framework for stablecoins, U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce recently highlighted the necessity for “room for failure.”
Peirce noted the increased interest in stablecoins among regulators during an online discussion. Peirce encouraged the SEC to grant exemptions to specific technologies, which would allow for essential experimentation.