British Chancellor of the Exchequer Rishi Sunak leaves 11 Downing Street in London on March 23, 2022.
Daniel Leal | Agence France-Presse | Getty Images
LONDON – The UK government will soon unveil plans to regulate the cryptocurrency market, focusing on a rapidly growing type of token known as stablecoin, according to four industry sources familiar with the matter.
British Finance Minister Rishi Sunak is expected to make an announcement in the coming weeks about a new regulatory regime for cryptocurrency, sources told CNBC, preferring to remain anonymous because the information has not yet been made public.
The Treasury declined to comment when asked about the plans by CNBC.
Details of the plans are still being finalized, but sources who spoke to CNBC say they are likely favorable to the industry, providing legal clarity for a sector that has been mostly lacking in regulation until now.
According to the sources, Treasury officials have shown a willingness to understand the intricacies of the cryptocurrency market and the so-called stablecoins, which are digital assets that derive their value from existing currencies such as the US dollar.
The department held discussions with a number of companies and trade groups. This includes the crypto exchange of the Winklevoss brothers, Gemini, one of the sources said. Gemini issues its own stablecoin called the Gemini dollar, which is pegged to the US dollar.
Stablecoins have seen an exponential growth in usage over the past few years, along with a surge in interest in cryptocurrencies on a larger scale. Tether, the world’s largest stablecoin, now has a total circulating supply of more than $80 billion – up from about $4 billion two years ago.
But the tokens have also worried regulators, who fear they may not be fully backed by an equivalent amount of reserves, and are being used for money laundering and other illicit activities.
Meanwhile, regulators are concerned about the financial system’s potential exposure to Bitcoin and other digital currencies, as well as their potential use to evade sanctions imposed on Russia amid its invasion of Ukraine.
Financial stability risks
The Bank of England on Thursday called on policy makers to expand regulatory frameworks to reduce the risks posed by crypto to financial stability.
Bank of England Deputy Governor Sam Woods wrote a Message To several bank CEOs saying that there is “increasing interest” from banks and investment firms “to enter the various crypto markets.”
The Treasury move is seen as a response to President Joe Biden executive order The sources called for coordination from various US federal agencies on regulating cryptocurrency. Many industry insiders bemoan the lack of similar action from the UK
A number of companies, including Revolut, Blockchain.com and Copper They may have to terminate their encryption operations in the UK This week if they fail to register them on the Financial Conduct Authority’s crypto asset registry in time for March. Deadline 31.
The FCA said that a “significant number” of crypto companies do not meet the required anti-money laundering standards. Only 33 companies succeeded in registering. More than 80% of companies evaluated by the regulator either withdrew their applications or had their applications rejected.
