The government is one step closer to allowing stablecoins to be used as a form of payment in the UK after releasing plans for its regulation.
The Treasury today (April 4) confirmed that the government intends to adjust the UK’s legislation to include the use of stablecoins as a legitimate form of payment.
Stablecoins are a form of cryptoasset that are normally pegged to a currency, and are intended to maintain a stable value.
In a response to an industry consultation last year, the government said certain 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 is his ambition to make the UK a ‘global hub’ for cryptoasset technology.
“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.”
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.
It said it will need to be considered further before an extension of the regulatory regime is taken to include the use of stablecoins for anything other than as a form of payment.
It said it intends to further review legislation later this year that will look at the wider range of cryptoasset activities, particularly as a means of investment.
“This is needed to respond to the increasing uptake of wider cryptoassets; the risks to consumers and markets of their remaining outside the regulatory perimeter for an extended period; and in order to create a regulatory environment in which these services can responsibly innovate.”
The government has also committed to introducing a ‘financial market infrastructure sandbox’, establishing a cryptoasset engagement group to work more closely with the industry, and to “explore” ways to enhance the competitiveness of the UK tax system to encourage further development of the cryptoasset market.
The Treasury has said it is working with the Royal Mint on a non-fungible token (NFT) this summer as an “emblem of the forward-looking approach” the UK is “determined” to take.
The Bank of England is currently exploring proposals to create a central bank digital currency.