USDC was launched in 2018 by crypto firm Circle and is now the second largest stablecoin in the world, with more than $30 billion worth of tokens in circulation.
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LONDON — The United Kingdom is likely to introduce stablecoin laws within a matter of “months, not years,” according to the top policy officer at crypto firm Circle.
Dante Disparte, Circle’s global head of policy, said he expects Britain will soon introduce legislation for stablecoins, a type of cryptocurrency that aims to maintain a constant peg to government currencies such as the US dollar or British pound.
“I think within months, and not years,” we will introduce formal laws for the stablecoin market, Disparte told CNBC in an interview last week during a visit to London.
The Treasury and the Bank of England were not immediately available for comment when contacted by CNBC.
Disparte suggested that Britain’s longer approach to introducing laws aimed at cryptocurrencies could have been a good thing, given the events that have unfolded in 2022, such as the collapse of FTX, a cryptocurrency exchange that was once valued at $32 billion, and other crises in the sector.
“You could also look back, and I think many in Britain and other countries would argue that they are right because they didn’t jump in too quickly and fully regulate the environment and land it because of all the problems we have seen in crypto in recent years,” said Disparte.
However, he added that there has recently been a sense of urgency to introduce formal regulations for stablecoins, as well as for digital asset trading and other crypto-related activities.
By not putting forward stablecoin-specific rules, Britain risks missing out on the benefits of the technology. He added that Britain has some catching up to do with the European Union, which has started enforcing the regulation of stablecoins under the MiCa (Markets in Crypto Assets) regulation. Singapore has also passed formal laws for the stablecoin industry.
“In the spirit of protecting the UK economy from excessive risk and cryptocurrencies, there is also a point where you ultimately protect the economy from job creation and the industries of the future,” Disparte said. He emphasized that “you can’t have the economy of the future unless you have the money of the future.”
Benefits cited by Disparte include innovation in the wholesale banking sector, real-time payments and the digitalisation of the British pound.
Bank of England officials are currently investigating whether or not to introduce a digital version of the pound, which was previously dubbed ‘Britcoin’ by the media.
Dante said he recently met Bank of England officials and was reassured by their approach to the central bank’s so-called digital currencies, or CBDCs.
What has Britain done so far?
Prime Minister Keir Starmer’s predecessor, Rishi Sunak, had previously envisioned Britain becoming a global crypto hub.
When the Conservative Party was in power, British government officials had indicated that new legislation for stablecoins and crypto-related services such as staking, exchange and custody would come into effect as early as June or July.
In April, the former government announced plans to become a “world leader” in the crypto space, outlining plans to bring stablecoins under regulation and consulting on a regime to regulate crypto trading assets, such as bitcoin.
Last October, Sunak’s government responded to a consultation on the regulation of the crypto industry, saying it would aim to introduce “phase 2 secondary legislation” in 2024, subject to parliamentary approval.
The new Labor government has not been as outspoken as the Conservatives on crypto regulation. In January, the party released a financial services plan, including a proposal to make Britain a hub for securities tokenization.
Securities tokens are digital assets that represent ownership of a real financial asset, such as a stock or bond.
Stablecoins are a multi-billion dollar industry, valued at over $170 billion, according to CoinGecko data. Tethers USDT token is the largest stablecoin by value, with a market capitalization of over $120 billion. Circle’s USDC is the second largest, with a combined value of coins in circulation worth more than $34 billion.
However, the market has been shrouded in controversy in the past. In 2022, Tether’s USDT fell from its $1 peg after a rival stablecoin, terraUSD, collapsed to zero. The events cast doubt on whether USDT was truly backed 1:1 by an equal amount of dollars and other assets in Tether’s reserves.
For its part, Tether says its currency is at all times backed by dollars and dollar-equivalent assets, including government bonds.