The UK to release plans to regulate the crypto market
UK Government officials have been talking to industry players such as crypto exchange Gemini in preparation, according to a CNBC report for the UK to release its plans for regulating the crypto market. A formal announcement is expected within a few weeks.
The regulatory framework from the Treasury, the UK’s finance ministry, will focus on stablecoins in particular. Stablecoinsany are a cryptocurrency designed to have a relatively stable price, typically through being pegged to a commodity or currency or having its supply regulated by an algorithm.
“Treasury officials have shown a willingness to understand the complexities of the crypto market and so-called stablecoins, digital assets that derive their value from existing currencies like the U.S. dollar,” one source told CNBC.
The UK’s finance minister, Chancellor Rishi Sunak, is expected to announce the new rules for the crypto market soon, and they are likely to be favourable to the industry, the report said.
Leading digital currencies bitcoin and Ethereum have hit all-time highs recently, though as many expect, these highs are usually followed by corrections. The crypto market has boomed over the past 18 months.
Stablecoins pegged to assets such as the US dollar, have also experienced a large uptick in usage in recent times, as they represent a stable investment compared with other more volatile cryptocurrencies.
This has caused governments and their regulators to quickly attempt to understand and properly monitor the industry. Some countries, such as China, have decided to impose outright bans on crypto activities, while others look to understand and regulate the industry.
So far, the UK looks set to work with the crypto industry to mitigate risks and facilitate a safe environment for investors. However, one point of concern is the potential use of cryptocurrencies in money laundering and other criminal activity, while Russian users move money to bypass sanctions.
Stablecoins can be pegged to anything from gold to oil and being pegged to government-issued currencies are the most popular – dollar-pegged tether, for instance, is the world’s third-largest cryptocurrency by market value, according to CoinMarketCap data.
To ensure a stablecoin holds onto its value, its issuer has reserves of the underlying asset. So for every tether coin issued, it has $1 in its reserves, and holders will always be able to exchange their tether coin for $1.
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Banks and other institutions have become increasingly interested in entering the crypto markets, and clear regulation is seen as necessary before they can dive in more deeply.
It was only last week that the Bank of England noted this interest as it laid out ideas for the UK’s first regulatory framework for crypto assets. The BoE has issued a deadline to the banks of June 3 to set out crypto plans and said UK regulators will need new powers.