The UK's Financial Conduct Authority (FCA) is working with the Treasury on a new regulatory framework for cryptocurrencies and stablecoins. The acceleration of the new rules comes in the wake of the collapse of the third largest stablecoin in the world, UST, on May 9.
Sarah Pritchard, FCA's Executive Director for Markets, said the recent instability of the stablecoin market "absolutely needs to be taken into account" when developing new regulations, according to Bloomberg.
The UK has recently taken an increasingly strict stance towards the cryptocurrency industry, with registration requirements that have forced several companies to move to friendlier jurisdictions overseas.
The control of Stablecoins
Pritchard, who oversees the FCA's work on cryptocurrencies, said this week that "innovation lasts if it works well, and we've clearly seen the consequences and some of the problems that can arise." The regulator claims that nearly 70% of adults who bought cryptocurrencies mistakenly thought they were regulated.
In a position similar to that of US regulators, UK regulators cite investor protection as one of the reasons for regulating.
"In the last week, where we have seen significant price movements, this has been highlighted and it demonstrates the importance of making sure people understand that this is a risk to where they put their money."
Currently, the FCA has been primarily concerned with money laundering issues which it claims are associated with digital assets. Over the course of this year, the financial supervisor will obtain new powers from the Treasury to manage the regulation of crypto assets.
The collapse of the stablecoin Terra and its LUNA token has given global politicians additional ammunition in their battle to control the cryptocurrency industry and limit the use of digital assets.
Across the ocean in the United States, Capitol Hill lawmakers have agitated over the Earth fiasco, bombarding organizations such as the Blockchain Association and the Digital Chamber of Commerce with questions about the structure of the stablecoin network.
Lobbyists are urging lawmakers not to take too hard action against stablecoins, as they are not all created equally. US politicians are decidedly poorly educated about cryptocurrencies and the underlying mechanisms, which leads them to consider introducing radical restrictions and stifling the nascent digital asset industry.
Perspectives of the Stablecoin ecosystem
Stable coins currently account for around 12% of the total cryptocurrency market capitalization, with $ 162 billion. This figure has shrunk by about 17% from its peak, largely due to the collapse of the UST $ 18 billion network, which is now worth just $ 630 million.
The largest stablecoin in the world, Tether, also saw its supply shrink. USDT's outstanding offering is currently $ 73 billion, down 12% from $ 83 billion, mainly due to redemptions and Investors who have abandoned cryptocurrency. Circle's USDC now has a market value of approximately $ 53 billion, not far from its all-time high.