The chancellor of the Exchequer, Rishi Sunak, has announced that the Treasury will reveal plans to regulate the cryptocurrency market in the UK in the coming weeks.
The new regulations will focus mostly on “stablecoins”, a type of digital currency that has its value fixed to existing currencies. This may be a fiat currency, such as the British pound, but could also be a commodity or even another cryptocurrency.
The Treasury has reportedly been in talks with several companies and crypto exchange platforms. This includes the Gemini platform, which already offers its own stablecoin fixed to the US dollar called “Gemini dollars”.
Stablecoins have steadily become more popular in recent years. Tether, the largest stablecoin currently available, has a total circulating supply of $80 billion. This is an increase from $4 billion just two years ago.
As it currently stands, the only regulation the UK has surrounding cryptocurrencies and crypto exchanges involves such platforms needing to register with the Financial Conduct Authority (FCA). The Treasury hopes that further regulations will provide more legal security for the sector.
Bank of England plans regulation for cryptoassets
The move follows an announcement that the Bank of England (BoE) has started preparing regulatory framework in the UK for cryptoassets. Concerns about regulation have been prevalent in the past few weeks, particularly over fears that cryptocurrencies could be used to bypass sanctions placed on Russia following the invasion of Ukraine.
The BoE’s Financial Policy Committee (FPC) also wants to ensure the risks that come with trading cryptocurrencies can be managed within the banking system.
The FPC stated: “While cryptoassets are unlikely to provide a feasible way to circumnavigate sanctions at scale currently, the possibility of such behaviour underscores the importance of ensuring innovation in cryptoassets is accompanied by effective public policy frameworks to maintain broader trust and integrity in the financial system.”
The FPC claims that this move to further increase legislation for cryptocurrencies should function similarly to those of existing financial services, meaning they will be subject to the same laws.
The announcement has come after the US government recently called for coordination throughout different federal agencies regarding crypto regulation.