In a recent publication, the UK Treasury department disclosed its intentions to propose a domestic regulatory approach for stablecoins. The Chancellor, Rishi Sunak, also welcomes the idea of researching a potential central bank digital currency (CBDC). By recognizing the digital currencies, the country seeks to maintain and elevate its position in technological innovation.
Besides the digital currencies, the UK Treasury also seeks to bolster the country’s financial competitiveness by issuing a first-ever Sovereign Green Bond in the UK.
UK Treasury Plans for Stablecoin Regulation
In the “financial services statement”, the UK Treasury recognized private-issued stablecoins as new technologies for payments. It further highlights the benefits of stablecoins, noting that such digital currencies can transform how the public transact monetarily. People will exchange and store their money in a completely different manner. Stablecoins can also serve as a faster and cheaper means for making payments.
By proposing a regulatory approach for relevant stablecoin initiatives in the UK, the Treasury department aims to mitigate risks associated with pegged digital currencies. This will enable consumers to harness the potential benefits of digital currencies without getting exposed to risk. Per the statement, the Treasury Department also aims to manage the effect of stablecoins on the country’s financial stability, via the regulation.
The issue of stablecoin regulation became a widely-discussed topic among several regulators of the world. Particularly the Facebook Libra announcement stirred things up a bit. Especially in Europe, several lawmakers urged governments to adopt strict and clear regulatory guidelines for stablecoins first and foremost. The regulators were mostly concerned about the sovereignty of the economy and the protection of consumers.
The UK is Researching a CBDC
The UK Treasury didn’t provide more details on how it intends to regulate stablecoins or manage their risks. However, it disclosed that relevant stablecoin issuers would be required to meet the same minimum standards expected of other rival payment methods in the country. The Chancellor also affirms the UK’s work to maintain a leading role in the conversation about CBDCs around the world.
As such, he welcomed the CBDC research conducted by the Bank of England. This study will help the UK government decide on whether central banks can launch their CBDC to complement cash. No final decisions have been made yet, nor are they expected in the near future.