Editorial & Advertiser disclosure

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

Britain proposes safety net against failing stablecoins

Published by Wanda Rich

Posted on May 31, 2022

Featured image for article about Top Stories

By Huw Jones

LONDON (Reuters) – Britain’s finance ministry set out plans on Tuesday for adapting existing rules to deal for any major stablecoin collapses, such as with TerraUSD this month.

It is the latest sign of how regulators are trying to catch up with fast-moving developments in crypto markets which straddle national borders.

“Since the initial commitment to regulate certain types of stablecoins, events in cryptoasset markets have further highlighted the need for appropriate regulation to help mitigate consumer, market integrity and financial stability risks,” the ministry said.

Banks, insurers and mainstream payment companies must comply with rules which ensure their deposit accounts, policies or services can be transferred quickly to another provider if they go bust, to help avoid panic and contagion in markets.

Stablecoins, which play a pivotal role in crypto markets, are digital tokens pegged to the value of traditional assets, such as the U.S. dollar, and are seen as having a bigger role in payments.

The collapse of TerraUSD, a popular stablecoin which was the 10th largest cryptocurrency, triggered central bank concerns in a little-regulated sector.

“The failure of a systemic digital settlement asset firm could have a wide range of financial stability as well as consumer protection impacts,” the ministry said in a consultation paper https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1079348/Stablecoin_FMISAR_Consultation.pdf.

“This could be both in terms of continuity of services critical to the operation of the economy and access of individuals to their funds or assets.”

While work continues on whether bespoke rules were needed for winding down failed stablecoins, existing rules for handling payment firm failures should be adapted, the ministry said.

It proposed amending the Financial Market Infrastructure Special Administration Regime, which would give the Bank of England powers to ensure continuity in stablecoin payment services during a crisis.

(Reporting by Huw Jones; Editing by David Holmes)