“Since the initial commitment to regulate certain types of stablecoins, developments in the crypto asset markets have highlighted the need for proper regulation to help mitigate risks to consumers, market integrity and financial stability.”said the Ministry.
Banks, insurers and major payment companies must adhere to rules that ensure their deposit accounts, policies or services can be quickly transferred to another provider if they fail, to help prevent market panic and contagion.
Stablecoins, which play a critical role in cryptocurrency markets, are digital tokens pegged to the value of traditional assets, such as the US dollar, and are seen as playing a larger role in payments.
The collapse of TerraUSD, a popular stablecoin that was the 10th largest cryptocurrency, sparked concern from central banks in a loosely regulated sector.
“The bankruptcy of a systemic digital asset settlement company could have a wide range of impacts on financial stability, as well as consumer protection”the ministry said in a consultation document.
“This could be both in terms of continuity of services critical to the functioning of the economy and of individuals’ access to their funds or assets.”
While work continues on the need to establish specific rules for the liquidation of bankrupt stablecoins, the existing rules for managing bankruptcies of payment companies should be adapted, according to the Ministry.
The portfolio proposes to amend the Special Administration Regime for Financial Market Infrastructures, which would give the Bank of England powers to ensure the continuity of stable cryptocurrency payment services during a crisis.
Source: Ambito
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