UST CrashThe UK legalized stablecoins to open up growth opportunities while ensuring the financial market

UK’s Department of Treasury has reportedly decided to go ahead with legalizing stablecoins as a form of payment. Stablecoins are cryptocurrencies where the price is designed to be pegged to a cryptocurrency, fiat money, or exchange-traded commodities Contents. These stablecoins are an attempt to peg their market value to some external reference.

These may be pegged to a currency like the U.S. dollar or to the price of a commodity and pursue price stability by maintaining reserve assets as collateral or through algorithmic formulas that are supposed to control supply. So UK Majesty's Treasury was welcomed by the crypto community, the decision comes as a shocker due to its proximity to the recent fall of the popular algorithmic stablecoin, TerraUSD. In the collapse of the UST, the UK Treasury plans to legalize fully-backed stablecoins such as Tether and USD Coin.

UK government legalizing stablecoins:

During the Queen’s speech at the House of Lords, Prince Charles announced the introduction of a new legislation bill across various sectors, including measures to drive economic growth to improve living standards in the region that would help tackle illicit finance, and reduce economic crime and help businesses grow. Its main purpose is to open up growth opportunities while ensuring financial stability as it introduces new financial technologies.

In the Terra ecosystem, the recent crash saw an unrecoverable downfall of LUNA and UST. It was expected to raise red flags among the regulators. It is to ensure the U.K. financial services industry is always at the forefront of technology and innovation. Stablecoin TerraUSD links to Terra LUNA via an algorithm that failed, leading to a collapse in both.

Both US and UK have been prominent proponents of that, and now, in a significant decision, the UK Department of Treasury is to have decided to go ahead with its decision to regulate stablecoins as legal tender. But Economic secretary John Glen in a tweet suggested that stablecoins will be brought into UK payments regulation. He added, by doing so, would bring UK financial services sector to the forefront of technological advancement, allowing service providers to operate and invest.

The UK government is looking to drive innovation while other jurisdictions continue to hinder growth in space. While the UK looks to legalize stablecoins as a means of payment, US lawmakers appear divided.

The UK government’s consultation sought views on how the UK can ensure its regulatory framework is equipped to harness such benefits, supporting the adoption of cutting-edge technologies, while mitigating the potential risks. Through its consultation, the government proposed a staged and proportionate approach to crypto asset regulation, which is sensitive to risks posed and responsive to new developments in the market.

In the final thought, it is to regulate stablecoins such as Tether, which is pegged at dollar value and leaves our TerraUSD altogether. The UK government also posed broad questions on the role of other forms of crypto-assets used primarily as retail investments and the growth of decentralized finance. The government’s planned consultation on crypto-asset regulation will set out proposals for these innovations, reflecting feedback received.