Britain will concentrate first on controlling stablecoins rather than the more comprehensive cryptocurrency industry. Its financial services minister said on Tuesday, acknowledging the threat to competition should any significant private initiative dominate the emerging sector.
Facebook Inc’s move in 2019 to launch its own stablecoin Diem, then known as Libra, sparked fears among governments and central banks that a major payments rival could surface overnight.
Cryptocurrencies to Face Light Approach
Three months ago, a consultation paper on possible regulatory methods for crypto-assets and stablecoins was released by Britain’s government. It planned a very light-touch approach to crypto-assets, partially because the sector is still at an expansive niche and customers seem to be aware of the substantial speculation risk.
The most recent study from the FCA concludes that crypto equivalents’ primary aim is to invest speculatively and that customers are aware of the risks. The FCA functions as a financial management agency. In the survey, 47% reported that they bought cryptocurrencies ‘as a money-making game,’ and 89% appreciated the lack of regulatory security. The explanations for the light approach are this recognition and niche acceptance.
It reported, however, that it plans to add stablecoins to the regulatory perimeter. This decision is due to mainstream utilization capacity that gives rise to financial stability issues, consumer threats, and incumbents’ impacts. It has reiterated this recently, as John Glen told a City & Financial Conference that the competition risk is managed.
He added that some companies would quickly gain supremacy and dump other players because of their ability to scale and tap into existing online services. They feel that it is less immediately urgent to intervene in larger cryptocurrency markets.
Stablecoins Could Get Out of Control
Stablecoins such as Diem are designed to escape the volatility characteristic of cryptocurrencies such as bitcoin.
The most significant portion of cryptocurrencies is stablecoins, Glen said by trading amount. Although there has been no global systemic player, he said, it could change quickly. Tether, a fraction of bitcoin and little used for commercial use, is the most significant stablecoin by market capitalization. Stablecoins are also a preferable tool for trading and investments.
Glen said the UK would not stop the innovation or guard against the distributed ledger technology that supports cryptocurrencies like bitcoin. He also added that they have an opportunity once in a lifetime to make huge strides with financial service quality and eventually support customers and the entire economy.
Separately, Britain’s financial watchdog said it would not be adequate to impose on stablecoins existing electronic money – “e-money,” as certain currencies or other assets have backed them. Alex Roy, head of consumer distribution policy at the Financial Conduct Authority, at the same conference said that the e-money regime isn’t a perfect match for crypto.