The UK government has published a consultation paper outlining a strategy to reduce risk for investors holding stablecoins.
- The proposal follows the collapse of algorithmic stablecoin TerraUSD (UST), which lost its 1:1 peg to the U.S. dollar during a sell-off in the crypto market earlier this month.
- The government is recommending amending existing legislation to give the Bank of England the power to appoint administrators to oversee insolvency arrangements with failed stablecoin issuers.
- "Since the initial commitment to regulate certain types of stablecoins, events in the cryptoasset markets have further highlighted the need for appropriate regulation to mitigate risks to consumers, market integrity and financial stability," the Treasury said in its proposal, which will be considered by Parliament as time permits.
- Regulators around the world have focused on stablecoins in the wake of Terra's implosion, with the European Commission advocating a broad ban on the asset class.
- The deadline for feedback on the consolation plan is Aug. 2.