UK government recognizes stablecoin as a valid form of payment
The UK government is one step closer to allowing stablecoin to be used as a form of payment in the country after it released plans for its regulation. Today, the UK Treasury confirmed that stablecoins will be brought within regulation paving their way for use in the UK as a recognized form of payment.
In an announcement on Monday, the government said the measures will include legislating for a ‘financial market infrastructure sandbox’ to help firms innovate, an FCA-led ‘CryptoSprint’, working with the Royal Mint on an NFT, and an engagement group to work more closely with industry.
Stablecoins are a form of cryptoasset that are typically pegged to a fiat currency such as the dollar and are intended to maintain a stable value. With appropriate regulation, they could provide a more efficient means of payment and widen consumer choice.
Crypto day traders typically use Stablecoins as safe haven by shifting their unstable tokens to safe real currencies (like the dollar) because wild market fluctuations make it unsafe to hold. Unlike regular cryptocurrencies like Bitcoin and Ether, stablecoins are cryptocurrencies without volatility. They are digital currencies that are linked to an underlying asset such as a national currency or a precious metal such as gold. The main types of stablecoins include fiat-backed, cryptocurrency-backed and commodity-backed stablecoins.
Last year, the UK government said some stablecoins have the capacity to potentially become a widespread means of payment, driving consumer choice and efficiency.
Chancellor of the Exchequer, Rishi Sunak said: “It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country. We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term.”
He also added, “This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation.”
In the document, the government said it notes stablecoins are currently predominantly used to facilitate trading and investment in unbacked cryptoassets, such as Bitcoin, as well as to play a “critical function” in emerging decentralised finance applications.