Government Sets Out Plan To Recognise Stablecoins

The UK government this week has opened up about its plans to regulate digital assets, that will see the Royal Mint create a Non-Fungible Token (NFT) by the summer.

The government announcement is part of its plans to make the UK a global cryptoasset technology hub, and includes moves that will see stablecoins recognised as a valid form of payment.

It comes after the Bank of England this time last year set up a taskforce at the behest of the Chancellor, Rishi Sunak, who had asked the bank to look at the case for a new “Britcoin”, or central bank-backed digital currency.

Regulatory framework

Last month the Bank of England began to publicly outline its first regulatory framework for cryptoassets, when it published a policy document on the matter.

And now the government has a series of measures to make the UK a global hub for cryptoasset technology and investment, which includes plans to regulate stablecoins so they can be used as a recognised form of payment in the UK.

Another measure will include legislating for a ‘financial market infrastructure sandbox’ to enable firms to experiment and innovate; exploring ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market; working with the Royal Mint on an NFT this summer; and establishing a Cryptoasset Engagement Group to work more closely with the industry.

“It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country,” said Chancellor of the Exchequer, Rishi Sunak.

“We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term,” said the Chancellor. “This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation.”

Further steps

The UK’s vision for being a global hub for cryptoasset technology was set out in a speech by the Economic Secretary to the Treasury, John Glen at the Innovate Finance Global Summit this week.

He also announced that the UK will proactively explore the potentially transformative benefits of Distributed Ledger Technology (DLT) in UK financial markets, which enables data to be synchronised and shared in a decentralised way to potentially achieve greater efficiency, transparency and resilience.

The government will legislate to establish a financial market infrastructure (FMI) ’Sandbox’ that will enable firms to experiment and innovate in providing the infrastructure services that underpin markets, in particular by enabling Distributed Ledger Technology to be tested.

The government further confirmed that it will initiate a research programme to explore the feasibility and potential benefits of using DLT for sovereign debt instruments.

John Glen also confirmed that the government will consult on wider regulation of the cryptoasset sector later this year.

Other measures the government will consider are:

• ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market in the UK. It will review how DeFi loans – where holders of cryptoassets lend them out for a return – are treated for tax purposes. The government will also consult on extending the scope of the Investment Manager Exemption to include cryptoassets.
• The Chancellor has commissioned the Royal Mint to create a Non-Fungible Token this summer.
• The Financial Conduct Authority will hold a two day ‘CryptoSprint’ in May with industry participants, seeking views directly from industry on key issues relating to the development of a future cryptoasset regime.
• The Economic Secretary will establish and chair a Cryptoasset Engagement Group, convening key figures from the regulatory authorities and industry to advise the government on issues facing the cryptoasset sector.