The catastrophic failure of Terra’s algorithmic stablecoin, TerraUSD (UST), last week exacerbated the chaos in the crypto industry and accelerated plans to regulate the stablecoins market.
Following the market meltdown, global financial regulators started proposing different legislations to regulate stablecoins better and prevent similar incidents from occurring in the future.
UK to Legalize and Regulate Stablecoins
Over the weekend, the United Kingdom Treasury revealed plans to legalize stablecoins as a payment medium in the country. Per the report by The Telegraph, the new development includes plans to regulate stablecoins, which comes as part of the financial legislation mentioned in the Queen’s Speech.
“Legislation to regulate stablecoins, where used as a means of payment, will be part of the Financial Services and Markets Bill which was announced in the Queen’s Speech… This will create the conditions for issuers and service providers to operate and grow in the UK, whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely,” a spokesman for the Treasury said.
The Treasury pointed out that UST’s failure is a testament to the fact that not all stablecoins are suitable as a reliable payment method, adding that they are similar to the more volatile cryptocurrencies.
While the organization has no plans to add any algorithmic stablecoins to the proposed legislation, it noted that it will continue to explore the stability of the “more stabilized” stablecoins and “take further regulatory action if required.”
S.Korea Launches Emergency Check on Crypto Trends
To protect digital asset investors in the South Korean crypto market, the country’s financial regulators have launched an emergency check on trends and are currently making plans to enact legislation toward that goal.
Dubbed the Basic Act on Digital Assets, the proposed legislation will reportedly include consumer protection as watchdogs want to create an opportunity for financial consumers to become aware of the risks of investing in virtual assets.
An official from a local crypto exchange said:
“The most worrying thing about this incident is that the failure of the Terra coin can be seen as a failure of the entire cryptocurrency industry… Domestic regulations are in place.”
Per the report, after careful consideration of the trends and virtual currency regulation laws in various major countries, the Korean government will enact the Digital Asset Basic Act next year and then implement it in 2024.
Meanwhile, U.S. regulators have already called on all global financial regulators to work together in regulating the stablecoins market to avoid a repeat of the UST saga.