Visual representation of Bitcoin.
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LONDON – The UK government will soon unveil plans to regulate the cryptocurrency market, focusing on a fast-growing type of token known as stablecoins, according to four industry sources familiar with the matter.
UK Treasury Secretary Rishi Sunak is expected to announce in the coming weeks a new regulatory regime for the crypt, CNBC sources said, preferring to remain anonymous as the information has not yet been released.
The Treasury declined to comment on a question about CNBC’s plans.
Details of the plans are still being finalized, but sources who spoke to CNBC say they are likely to be favorable to the industry, providing legal clarity for a sector that has so far been largely absent from regulation.
According to sources, Treasury officials have demonstrated a willingness to understand the complexities of the crypto market and so-called stablecoins, digital assets whose value is derived from existing currencies such as the US dollar.
The department has negotiated with a number of firms and trade groups. This includes the Winklevoss Brothers Gemini cryptocurrency exchange, one source said. Gemini is releasing its own stablecoin called the Gemini dollar, which is pegged to the US dollar.
Over the past few years, the use of stablecoins has grown exponentially in tandem with growing interest in cryptocurrencies on a larger scale. Tether, the world’s largest stablecoin, now has a total turnover of more than $ 80 billion – up from about $ 4 billion two years ago.
But these tokens have also raised concerns among regulators, who worry that they may not be fully backed by an equivalent amount of reserves and are used for money laundering and other illegal activities.
Meanwhile, regulators are concerned about the possible impact on the financial system of bitcoins and other digital currencies, as well as their possible use to evade sanctions against Russia against the background of its invasion of Ukraine.
Risks of financial stability
The Bank of England on Thursday called on politicians to expand the regulatory framework to limit the risks posed by the crypto, for financial stability.
Deputy Governor of the Bank of England Sam Woods wrote a letter to several bank executives, in which he said that banks and investment firms “increased interest” in “entering various cryptocurrencies.”
The move is seen by the Treasury Department as a response to a presidential decree by Joe Biden calling for the coordination of various U.S. federal cryptocurrency agencies, sources said. Several industry insiders complained about the lack of such action from the UK
A number of companies, including Revolut, Blockchain.com and Copper, may be forced to suspend their cryptocurrencies in the UK this week if they do not make it to the Office of Financial Control’s cryptocurrency register in time for the March 31 deadline.
The FCA said a “large number” of crypto businesses did not meet required anti-money laundering standards. A total of 33 companies were included in the register. More than 80% of firms rated by the regulator either withdrew their applications or were rejected.