U.K. Government Takes Step on Making Stablecoins a Form of Payment

On July 19, Nadhim Zahawi, the chancellor of the Exchequer in the U.K., said the government will introduce a bill to set out how stablecoins may be used as a means of payment.

The bill follows the Treasury’s vow to explore measures designed to improve the competitiveness of the U.K. tax system regarding cryptocurrencies, study the legal status of DAOs, and launch a market infrastructure sandbox for digital firms in 2023.

The move comes as regulators across the West continue to wrestle with the challenges and opportunities of digital tokens pegged to reserve currencies such as the U.S. dollar, and algorithmic stablecoins that are more opaque.

Light Touch

In May, the Terra ecosystem collapsed after its algorithmic stablecoin, UST, slipped its peg and cratered. Its failure triggered a deep selloff in crypto markets and contributed to the failure of other big players such as Three Arrows Capital, the $10B hedge fund that recently declared bankruptcy. U.S. Treasury Secretary Janet Yelles has asked Congress to introduce legislation this year as part of a crackdown on stablecoins.

The U.K., famed for its “light touch” approach to financial regulation, has taken a softer tack. In April, the U.K Treasury recognized stable tokens as a “valid form of payment”.

Sterling Stablecoin

Stablecoin issuers appear to have been gearing up for the U.K.’s pro-stablecoin shift.

On June 22, Tether, the company behind the largest centralized stablecoin USDT, said this month it will launch a stable token pegged to the British pound called GBPT. The company cited the U.K Treasury’s April consultation, stating that the government said it will “make moves to see stablecoins recognized as a valid form of payment.”

On July 11, Blackfridge, an Isle of Man-based fintech firm, launched its own GBP-tracking stablecoin called Poundtoken. The token is purportedly fully backed by GBP, with the firm claiming to have appointed KPMG to provide monthly attestations proving its reserves.

Binance previously launched a GBP-denominated stablecoin on its exchang