Launched in 2018 by crypto firm Circle, USDC is now the second largest stablecoin globally, with more than $30 billion worth of tokens in circulation.
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LONDON — The United Kingdom is likely to see stablecoin laws introduced in a matter of “months, not years,” according to the chief policy officer of crypto firm Circle.
Dante Disparte, Circle’s global head of policy, said he sees the UK soon introducing legislation for stablecoins, a type of cryptocurrency that aims to maintain a permanent link to government currencies such as the US dollar or the British pound.
“I think we are within months, not years” of formal laws for the stablecoin market, Disparte told CNBC in an interview last week during a visit to London.
The Treasury and the Bank of England were not immediately available for comment when contacted by CNBC.
Disparte suggested that the UK’s longer approach to introducing targeted crypto laws may have been a good thing given the events that took place in 2022, such as the collapse of FTX, a crypto exchange once worth 32 billion dollars, as well as other industry crises.
“You can also look back, and I think many in the UK and elsewhere will argue that they are justified in not coming in very quickly and fully by fixing and bringing the environment down to earth because of all the issues we’ve seen in crypto over the past few years,” Disparte said.
However, he added that recently, there has been a sense of urgency to introduce formal regulations for stablecoins, as well as digital asset trading and other crypto-related activities.
By not issuing specific regulations for stablecoins, the UK would risk missing out on the benefits of the technology. He added that the United Kingdom has some catching up to do with the European Union, which has begun implementing regulation of stablecoins under its MiCa, or Markets in Crypto Assets, regulation. Singapore has also agreed to formal laws for the stablecoin industry.
“In the spirit of protecting the UK economy from excess risk and crypto, there is also a point where you end up protecting the economy from job creation and the industries of the future,” Disparte said. He emphasized that “you cannot have the economy of the future if you do not have the money of the future”.
Among the benefits cited by Disparte are innovation in the wholesale banking industry, real-time payments and the digitization of the British pound.
Officials at the Bank of England are currently exploring whether or not to introduce a digital version of the pound, which has previously been dubbed “Britcoin” by the media.
Dante said he had met with officials from the Bank of England recently and was reassured by their approach to so-called central bank digital currencies, or CBDCs.
What has the UK done so far?
Prime Minister Keir Starmer’s predecessor, Rishi Sunak, previously predicted Britain would become a global crypto hub.
When the Conservative Party was in power, UK government officials had signaled that new legislation on stablecoins, as well as crypto-related services such as shares, exchange and custody, would be in place as early as June or July.
In April, the former government announced plans to become a “world leader” in the crypto space, outlining plans to bring stablecoins into the regulatory realm and consult on a regime to regulate cryptoasset trading , such as bitcoin.
Last October, the Sunak administration released a response to a consultation on the regulation of the crypto industry, saying it would aim to introduce “phase 2 secondary legislation” in 2024, subject to parliamentary approval.
The New Labor government has not been as vocal as the Conservatives were about regulating crypto. In January, the party published a plan for financial services, which included a proposal to make the UK a hub for securities tokenisation.
Securities tokens are digital assets that represent ownership of a real-world financial asset, such as a stock or bond.
According to CoinGecko data, stablecoins are a multi-billion dollar industry, worth more than $170 billion. Tether’s USTDA token is the largest stablecoin by value, with a market capitalization of over $120 billion. ROUND USDC is the second largest, with a combined value of coins in circulation worth over $34 billion.
However, the market has been shrouded in controversy in the past. In 2022, Tether’s USDT fell from its $1 peg after a rival stablecoin, terraUSD, crashed to zero. The events raised doubts about whether USDT was truly backed 1:1 by an equal amount of dollars and other assets in Tether’s reserves.
For its part, Tether says its currency is backed by dollars and dollar-equivalent assets, including government bonds, at all times.