Tether, the world’s largest stablecoin, has redeemed more than $ 10 billion in May, fueling concerns about the 2008 “bank run.”
Justin Thalys | AFP via Getty Images
The UK wants to prevent Stablecoin from threatening the wider financial system after the collapse of the controversial crypto project Terra.
The government proposed on Tuesday to revise existing rules to manage the bankruptcy of stablecoin companies that could pose “systemic” risk.The suggestion is different Previously announced plan Regulate stablecoin under the law governing electronic payments.
“Since the initial commitment to regulate certain types of stablecoin, events in the crypto asset market have created a need for appropriate regulation to help mitigate consumer, market integrity, and financial stability risks. We further emphasized, “the government said in a consultation document outlining the proposal.
“The government believes it is important to be able to effectively apply the existing legal framework to manage the risks posed by the potential for systematic DSA failure. [digital settlement asset] A company whose purpose is financial stability. “
Stablecoin is a cryptocurrency whose value is fixed to traditional assets, and in most cases USD.. TerraUSDThe so-called “algorithm” stablecoin was intended to follow this arrangement using a combination of code and partial backing from Bitcoin and other digital tokens.But that’s Implosion Earn the relevant tokens earlier this month Luna Tumbling with it..The panic over the blunder has disappeared Hundreds of billions of dollars From the entire crypto market.
As a result, there are concerns for regulators who are concerned about the risks Stablecoin poses to the wider financial system. TetherThe world’s largest stablecoin has been redeemed over $ 10 billion in the weeks following the collapse of Terra, fueling 2008-style horror.Bank run“It has a knock-on effect on other financial markets. Tether says the token is fully backed by the assets held in the reserve, but critics are not yet convinced and it is complete. Seeking an audit.
The government aims to implement additional safeguards in existing legislation on bankruptcy of companies operating major financial market infrastructures. Such provisions consider the return or transfer of private keys that protect your funds. The Bank of England will serve as the primary regulatory agency for enforcing the rules. Discussions on the proposal are currently underway and will end on August 2.
Glen Goodman, eToro’s crypto advisor, said the proposal was “quite dramatic.”
The government has virtually accepted that “some stablecoins can be as important to the system as banks, so they are treated as special cases and should be supported in case of failure. “.