The United Kingdom government plans to regulate stablecoins, just like many other governments. The UK also wants to stimulate innovation and the crypto industry, but the country wants to do that in a safe way. However, the government is clearly not a fan of Terra, especially TerraUSD (UST).

More clarity for stablecoins

That writes The Telegraph, who spoke to a number of government spokespersons. Last month, the government announced it would introduce “world-class stablecoin regulations.” The UK is often praised around the regulation of cryptocurrencies, because companies know more clearly where they stand. Many other countries could learn from this, including the Netherlands and the United States. Rishi Sunak of the Treasury Department says UK financial services will always remain at the forefront of technology and innovation.

It is not yet entirely clear how the regulation of stablecoins will work out, but we do know that it must offer a lot of certainty around payments and the protection of the value of the tokens. Anti-money laundering measures (Anti-Money Laundering, AML) and rules around identification (KYC, Know-Your-Customer) will undoubtedly also be part of the package. Those rules are already quite tight in the group of countries for crypto in general.

UK not a fan of TerraUSD (UST)

More interestingly, the UK has clearly moved away from stablecoins similar to TerraUSD (UST). Specifically, algorithmic stablecoins will not be regulated because algorithms cannot guarantee their value. UST is an algorithmic stablecoin, but it is not the only one. The decision is not that unexpected, as UST crashed hard when the Terra ecosystem collapsed.

These tokens will therefore not be in the ‘safe zone’, but they do not appear to be banned. Apparently, the ministry thinks that it is enough to clearly indicate what is and what is not acceptable, and that investors will have enough of their own research. It also means that some other stablecoins that do have collateral will remain legal.

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