CNBC: UK to reveal plans for cryptocurrency regulation in coming weeks, focus on stablecoins

The U.K. government will soon unveil plans to regulate the cryptocurrency market, with a focus on stablecoins, according to four industry sources familiar with the matter.

U.K. Finance Minister Rishi Sunak is expected to announce a new regulatory regime for cryptocurrencies in the coming weeks, sources told CNBC, speaking on condition of anonymity because the information is not yet public.

The Treasury Department declined to comment when asked by CNBC about the plan.

Details of the plan are still being discussed. Sources who spoke to CNBC said the plan could be good for the industry, providing clear laws for an industry that has so far been poorly regulated.

According to sources, Treasury officials have shown a willingness to understand the intricacies of the cryptocurrency market and stablecoins, digital assets whose value is derived from existing currencies such as the U.S. dollar.

The department has been in discussions with some companies and trade groups. That includes cryptocurrency exchange Gemini, one of the sources said. Gemini issued the stablecoin Gemini dollar, which is pegged to the US dollar.

The use of stablecoins has grown exponentially over the past few years as interest in cryptocurrencies has grown broadly. The world’s largest stablecoin, Tether, now has a total circulating supply of more than $80 billion, up from about $4 billion two years ago.

But the tokens have also drawn the attention of regulators, who fear they may not be backed by an equal amount of reserves and be used for money laundering and other illicit activities.

At the same time, regulators are concerned that bitcoin and other cryptocurrencies, which are more anonymous and uncontrollable than the financial system, could be used to evade sanctions during the Russian-Ukrainian conflict.

The Bank of England on Thursday called on policymakers to expand the regulatory framework to limit the risks cryptocurrencies pose to financial stability.

Bank of England Deputy Governor Sam Woods wrote to the CEOs of several banks, in which he stated that interest from banks and investment firms to enter various cryptocurrency markets is increasing.

The Treasury Department’s move is seen as a response to Biden’s executive order, which calls for coordination among various U.S. federal agencies on regulating cryptocurrencies, the sources said. And some in the industry lament the lack of similar action in the UK.

Some companies, including Revolut, and Copper, may be forced to shut down their U.K.-based cryptocurrency businesses if they fail to register on the Financial Conduct Authority’s Crypto Assets Register in time for the March 31 deadline .

The FCA said a large number of cryptocurrency companies did not meet the required anti-money laundering standards, with only 33 companies on the register. Over 80% of companies have withdrawn their applications or been rejected by regulators.

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