UK Proposes Additional Safeguards Against Stablecoins Following Terra Debacle

The U.K. government has published a consultation paper to propose a new set of regulatory changes for stablecoin issuers, in a bid to protect investors against the potential collapse of stablecoins. The deadline for feedback on the consolation is Aug. 2. “Since the initial commitment to regulate certain types of stablecoins, events in cryptoasset markets have further highlighted the need for appropriate regulation to help mitigate consumer, market integrity and financial stability risks,” the government said in a consultation paper Tuesday. The proposal follows the collapse of algorithmic stablecoin TerraUSD (UST), which lost its 1:1 peg with the U.S. dollar which triggered a crash in the crypto market earlier this month. The new proposal includes bringing about changes in the Financial Market Infrastructure Special Administration Regime (FMI SAR) to incorporate the challenges posed by potential failures of stablecoin issuers that are not banks. FMI SAR will subsequently transform into the general default framework for dealing with failed stablecoin projects. If a failed stablecoin project appears to threaten financial stability, it will be able to access the necessary insolvency arrangements. UK regulators are not the only ones who remain concerned around the collapse of Terra. Recently, US Consumer Financial Protection Bureau Director, Rohit Chopra told Bloomberg that the collapse of Terra illustrates that stablecoins can ne...