According to CNBC, the United Kingdom government is working on revealing a crypto regulation framework in the upcoming weeks, focusing on stablecoins.
Industry sources believe that the U.K’s decision-makers have a growing interest in stablecoins and the move is part of the government’s strategy of regulating the industry.
The financial regulatory body has held meetings with some crypto exchange platforms like Gemini. Gemini is a cryptocurrency exchange firm with a native dollar-pegged stablecoin called the “Gemini dollar.”
What is Stablecoin?
As the name implies, a stablecoin is a cryptocurrency designed to be stable and not prone to the price volatility experienced by other cryptocurrencies like Bitcoin and Ethereum.
Stablecoins are usually pegged to strong fiat currencies like the dollar, ensuring relative stability.
USDC is one of the leading stablecoins in the crypto industry, with its circulation being more than double its previous record, having reached $52.5 billion as of February 16. USDC’s circulation accounts for more than 29% of stablecoins in circulation currently in the market, behind Tether (USDT), which is the largest stablecoin with a total supply in circulation amounting to more than $80 billion, a huge increase of about $4 billion over the past two years.
However, the negative part of stablecoins is that they are more prone to being used for illegal financial dealings and money laundering.
The apex bank of England revealed that immediate risks associated with cryptocurrency to the U.K.’s financial system are not a cause for concern. Still, if left unchecked, the crypto industry is a risk that the government would not allow to continue.
FCA’s Move To Regulate Stablecoins
The U.K’s Financial Conduct Authority (FCA) is mandated to regulate the activities of digital assets operations and the companies involved in it.
So far, FCA has approved 33 companies that scaled through its vetting process. The vast majority of crypto firms failed to meet the criteria demanded as measures to curb anti-money laundering activities.
The deadline given by the FCA to crypto businesses is the last day of March. Many companies would face severe consequences if they failed to clear their names in the crypto-asset verification in time.
Blockchain news.com previously reported on March 25 that both the Bank of England and the U.K’s Central Bank announced the first-ever digital asset regulatory framework in the country.
The Central Bank admitted that the move was necessary even though the crypto industry is small compared to the mainstream financial sector. Still, if left unregulated, it would pose a serious risk to the financial sector’s stability. The U.K is not alone in voicing its fears over the lack of regulations in the crypto industry, with countries like the USA also taking major steps.
Along the way, governments worldwide have come to realize that cryptocurrency has come to stay, and rather than imposing a blanket ban on the industry, the need to regulate it would be beneficial to both the government and players in the digital financial space—a win-win for all involved parties.