Global Regulators Are Moving In Amid The Collapse Of UST Stablecoin
The collapse of Terra’s algorithmic stablecoin, TerraUSD (UST), last week wrecked havoc in the crypto industry, and seemingly has given boost for regulators plans to regulate the stablecoins market.
Following the market crash triggered by UST collapse, global financial regulators have started proposing different legislations to better regulate stablecoins and prevent similar incidents from occurring in the future.
United Kingdom
The United Kingdom Treasury has unveiled plans to legalize stablecoins as a payment medium in the nation. According to a report, the new development includes plans to regulate stablecoins, which comes as part of the financial legislation mentioned in the Queen’s Speech.
The UK Treasury spokesman said:
“Legislation to regulate stablecoins, where used as a means of payment, will be part of the Financial Services and Markets Bill which was announced in the Queen’s Speech… This will create the conditions for issuers and service providers to operate and grow in the UK, whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely.”
According to the Treasury, UST’s failure is a clear showcase that not all stablecoins are suitable as a reliable payment method, noting that they are similar to the more volatile crypto assets.
The Treasury doesn’t have any plans to include any algorithmic stablecoins to the proposed legislation, and said that it will continue to explore the stability of the “more stabilized” stablecoins and “take further regulatory action if required.”
South Korea
South Korean financial regulators have launched an emergency check on trends and are currently making plans to enact legislation toward that goal, citing investor protection as the reason.
‘Basic Act on Digital Assets,’ as the proposed legislation is called, will include consumer protection as watchdogs want to create an opportunity for financial consumers to become aware of the risks of investing in virtual assets.
An official from a local Korean crypto exchange noted:
“The most worrying thing about this incident is that the failure of the Terra coin can be seen as a failure of the entire cryptocurrency industry… Domestic regulations are in place.”
According to the news report, after thorough consideration of the trends and virtual currency regulation laws in various major countries, the Korean government will enact the Digital Asset Basic Act next year and then implement it in 2024.
The U.S. regulators have called on all global financial regulators to co-operate in regulating the stablecoins market to avoid a repeat of the UST saga.
It’s not known who was behind taking down UST, but some have speculated that it could have been an effort of a government or a government size entity. Whether it’s true or not, the events surrounding the UST collapse conveniently feeds into the regulatory discussion on stablecoins.
