After the collapse in the Terra network with its stable coin UST, the US Treasury issued its statement on stable coins.
On Monday of last week, Terra network’s two coins Luna & UST faced a significant downfall in the prices because of the high-pressure sell situation and algorithm-based concept used to make the UST coin stable at $1. However, initially, this experiment was unique in itself but failed in a critical situation.
On 10 May, UST stablecoin lost only 10% of its value and at that time it was a very big thing for the crypto industry’s traders. At the time of writing this article, the value of the UST coin is $0.138, which is 86% lower than the actual $1 pegged value.
By considering this situation, the UK Treasury openly stated on the regulation and adoption of stable coins to consider in the payment system but with the provisions to exclude algorithm-based stablecoins adoption like UST stable coin.
A spokesperson from the Her Majesty’s Treasury (Exchequer) said:
“Legislation to regulate stablecoins, which which are used as a means of payment, will be part of the Financial Services and Markets Bill, which was announced in the Queen’s Speech”.
The spokesperson also indirectly pointed out crypto assets pegged stable coins like UST and said that such kinds of stable coins can’t be introduced in payment systems, so with perfect analysis and research on such stable coins the agency will take suitable regulatory action & steps.
“The Government has been clear that certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto assets. We will continue to monitor the wider crypto asset market and stand ready to take further regulatory action is required.”
Earlier, around 2 years ago in November 2020, Rishi Sunak, the Chancellor of the Exchequer, stated that Central Bank Digital Currency (CBDCs) or Stable Coins can be used in the payment systems to achieve better efficiency & better experience.
In the last few months, the UK government also showed a significant inclination toward stable coin adoption in the payment system under the precise regulatory framework, where many government officials suggested introducing existing electronic money to suit stable coins.