The UK’s financial services minister said on Tuesday that the UK would focus on stablecoin regulation rather than the broader cryptocurrency market.
Uk Minister to Deal with Competitive Risk Against Major Private Efforts
If major private efforts dominated the emerging areas, competition would be threatened to the Uk.
Facebook’s move to launch its own stablecoin Diem (then called Libra) in 2019 raised concerns among governments and central banks that major payment rivals could emerge overnight.
“We have to deal with competitive risks,” said John Glenn at a city and finance conference.
Glenn said, “There is the potential for some firms to swiftly achieve dominance and crowd out other players, due to their ability to scale and plug into existing online services.”
“We believe the case for intervention in the wider cryptocurrency markets is less immediately pressing.”
Stablecoins like the planned Diem are designed to avoid the typical volatility of cryptocurrencies like Bitcoin. The stable coin is currently operated by associations such as Facebook and is currently applying for approval in Switzerland.
Glenn said that in terms of transaction volume, stablecoins have become the largest constituent of cryptocurrencies. He added that although there was not yet a global systemic actor, this situation could change quickly.
In terms of market value, the largest stablecoin line is a fraction of the size of Bitcoin and is rarely used for commercial purposes. Most stablecoins are used for trading and investing.
Glenn said the UK will not hinder innovation or become a protectionist in using distributed ledger technology as distributed ledger technology is the foundation for cryptocurrencies like Bitcoin.
He said, “We have a once-in-a-generation opportunity here to make vast strides in the efficiency of financial services, and ultimately benefit consumers and the economy as a whole.”
In addition, the UK Financial Regulator stated that it would not be appropriate to impose existing electronic currency rules on stablecoins as some of these rules are backed by multiple currencies or other assets.
Speaking at the same meeting, Alex Roy, director of consumer sales for the Financial Conduct Authority, said, “The e-money regime isn’t a perfect match for crypto.”
The UK electronic money regulations allow cashless payments and payment by card, phone or online money.