UK proposes crash safety net for cryptocurrencies
The British Treasury on Tuesday laid out plans to adapt existing rules to deal with any major cryptocurrency collapse, such as the one that happened this month with TerraUSD.
It is the latest sign of how regulators are trying to keep up with the rapidly evolving cryptocurrency markets that cross national borders.
“Since the initial commitment to regulate certain types of stablecoins, developments in cryptoactive markets have highlighted the need for appropriate regulation to help mitigate risks to consumers, market integrity and financial stability,” the Ministry said.
Banks, insurers and large payment companies should adhere to rules that ensure their deposit accounts, policies or services can be quickly transferred to another provider if they fail, to help prevent market panic and contagion.
Stablecoins, which play a critical role in cryptocurrency markets, are digital tokens tied to the value of traditional assets, such as the US dollar, and are seen as playing a larger role in payments.
The collapse of TerraUSD, a popular stablecoin that was the 10th largest cryptocurrency, has sparked concern from central banks in an industry that is poorly regulated.
“The failure of a systemic digital asset settlement company can have a wide range of impacts on financial stability and consumer protection,” the ministry said in a consultation paper.
“This can be both in terms of continuity of services critical to the functioning of the economy and individuals’ access to their funds or assets.”
While work continues on the need to establish specific rules for the liquidation of failed stablecoins, existing rules for managing payment company bankruptcies should be adapted, according to the ministry.
The portfolio proposes to amend the Special Administration Regime for Financial Market Infrastructures, which would give the Bank of England powers to ensure the continuity of stablecoin payment services during a crisis.
Originally published at https://www.reddit.com.
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