As part of a larger effort to make the UK a centre for digital payment businesses, the Treasury has revealed that it will regulate some cryptocurrencies.
It is expected that “stablecoins” would become accepted means of payment, giving users more trust in utilizing digital currencies.
Stablecoins are digital currencies that are connected to traditional currencies or assets such as gold.
They are thought to be less volatile than cryptocurrencies like Bitcoin.
The Treasury also stated that it will hold a consultation later this year on regulating a far broader variety of digital currencies, but did not specify which ones.
“We want to see tomorrow’s [cryptocurrency] firms – and the jobs they generate – here in the UK,” said Chancellor Rishi Sunak, “and by regulating properly, we can give them the confidence they need to consider and invest long-term.”
Tether and Binance USD are two well-known stablecoins that the Treasury has not yet acknowledged would be controlled.
In the United States, stablecoins are now utilized to support the trading, lending, and borrowing of other digital assets.
They are, however, not without debate. Tether, a Hong Kong-based corporation, has been criticized for its business methods, and the US Commodities Futures Trading Commission penalized it $41 million in 2021 for allegedly misstating its reserves.
Stablecoins will be regulated by the UK Treasury to guarantee that they may be used “safely” by the general population.
Cryptocurrencies are virtual or digital currencies that may be exchanged or used to purchase goods and services, albeit few stores accept them and several nations have outright outlawed them.
They are traded through “peer-to-peer” transactions, which means they are not mediated by banks or other third parties.
Regulators have warned that the value of some digital currencies has fluctuated dramatically, posing a risk. They are, however, becoming more mainstream, with large financial institutions investing in them.
Meanwhile, Elon Musk, the world’s richest man, has expressed his support for virtual currencies, calling Bitcoin a “wonderful thing.”
Regulators are scrambling to draft laws to govern cryptocurrencies, fearful that their rising popularity may jeopardize traditional banking institutions.
While just roughly 0.1 percent of UK wealth is presently held in digital assets, the amount is rapidly expanding, according to the Bank of England’s deputy governor in December.
Sir Jon Cunliffe warned reporters that a dramatic drop in the value of cryptocurrencies might have a cascading impact.
Meanwhile, the United States is working on laws in response to growing concerns that the bitcoin business is becoming a shelter for criminals.
Mining, the process of creating digital currency using large clusters of powerful computers, is also quite energy consuming. According to recent research, Bitcoin currently emits carbon emissions similar to Greece.
Mr Glen acknowledged that environmental problems existed and stated that the government “would be closely looking at energy use related with various crypto-technologies.”