Britain offers safety net against failing stablecoins


By Huw Jones

LONDON (Reuters) – Britain’s Treasury on Tuesday outlined plans to adapt existing rules to deal with any major stablecoin crashes, such as with TerraUSD this month.

This is the latest sign of how regulators are trying to catch up with rapid developments in crypto markets that straddle national borders.

“Since the initial commitment to regulate certain types of stablecoins, events in the crypto-asset markets have further underscored the need for appropriate regulation to help mitigate risk to consumers, market integrity, and security. financial stability,” the ministry said.

Banks, insurers and major payment companies must comply with rules ensuring that their deposit accounts, policies or services can be quickly transferred to another provider in the event of bankruptcy, in order to avoid panic and contagion on the steps.

Stablecoins, which play a central role in crypto markets, are digital tokens pegged to the value of traditional assets, such as the US dollar, and are considered to play a bigger role in payouts.

The collapse of TerraUSD, a popular stablecoin that was the 10th largest cryptocurrency, sparked central bank concerns in a poorly regulated industry.

“Failure of a systemic digital settlement asset company could have wide-ranging financial stability as well as consumer protection impacts,” the department said in a consultation paper https://assets.publishing .service.gov.uk/government/uploads/system/uploads/attachment_data/file/1079348/Stablecoin_FMISAR_Consultation.pdf.

“This could be both in terms of the continuity of services essential to the functioning of the economy and of individuals’ access to their funds or assets.”

As work continues to determine whether bespoke rules are needed to weed out failing stablecoins, existing rules for handling payments business failures should be adapted, the ministry said.

He proposed changes to the Financial Markets Infrastructure Special Administration Scheme, which would give the Bank of England the power to ensure the continuity of stablecoin payment services during a crisis.

(Reporting by Huw Jones; Editing by David Holmes)