In the UK, Her Majesty’s Treasury, the government department responsible for developing and implementing public finance and economic policies, has announced that it will now regulate cryptocurrencies. The move is part of a much larger and more comprehensive plan to make Britain a global hub for digital payment organisations. In this regard, the Treasury has also announced that it will launch a broad consultation on digital currencies in the summer.
The news comes three months after the government announced it would legislate to end “misleading promotions” on cryptocurrencies. In other words, a new law will prevent unscrupulous companies from being “economic with the truth” in their cryptocurrency advertising (i.e. say hogs) because the scope of regulation on financial advertising is expanded and consumer protection strengthened.
According to government figures, some 2.5million people in the UK now own ‘crypto-assets’, with more being purchased every day. It’s ironic that the popularity of crypto-assets is on the rise as recent research shows that popular understanding of what crypto-assets are and how they work is diminishing as more and more hopeful punters jump on the bandwagon. running, even if they don’t have the knowledge to manage what they have. bought in.
That said, the government is keen to “support innovation in crypto-assets and recognizes the potential benefits of certain products like stablecoins.” Essentially, stablecoins are cryptocurrencies whose price is pegged to cryptocurrency, fiat currency, or exchange-traded commodities.
Fiat money is not what you might have saved to buy an Italian car, but government-issued currency that is not backed by a physical resource such as gold bars or coins. silver bullion, but rather by the government that issued the silver in the first place. Most paper currencies, including the US dollar, euro and British pound, are fiat currencies. They are popular because central banks have a high degree of control over a national economy as they determine the amount of money printed. However, overprinting money can lead to inflationary pressures and even hyperinflation.
The government wants to convince the public that digital payments will be safe and secure
There are now over 16,000 cryptocurrencies in circulation around the world, a staggering number, and some of them will inevitably disappear, taking with them the face values of their customers’ holdings when they crash. This is why stablecoins are important: they are a way to make cryptocurrencies less volatile and more predictable (and cryptocurrencies can be as volatile and unpredictable as a bucket full of nitroglycerin).
Stablecoins are minted on a blockchain that users can buy, sell, and trade on an exchange the same way they would any other cryptocurrency. In an effort to preserve financial integrity, most stablecoins are tied to a pool of assets like a fiat currency and the entity that issues stablecoins (in this case, UK government-sanctioned issuers) , will hold reserves equal to the amount of stablecoins in circulation, the idea being that anyone holding a stablecoin “should” (and I write “should” deliberately) be able to redeem a stablecoin at a predefined ratio such as 1 stablecoin = 1 delivered.
As economies go global, the theory is that stablecoins make it easier to exchange money because they eliminate the need for multiple international bank accounts and replace them with a single crypto wallet, facilitating seamless peer-to-peer digital transfers. that third parties facilitate all transactions. (and taking a big commission for their services each time).
The UK government is keen to see stablecoins become a commonly recognized, safe and secure form of digital payment that people and organizations can use with confidence. Current multi-millionaire Chancellor of the Exchequer (Finance Minister) Rishi Sunak says he wants “tomorrow’s” cryptocurrency businesses – and the jobs they create – here in the UK, and by regulating effectively, we can give them the confidence they need to think and invest for the long term.
However, there is no official indication which of the many variations of over 200 stablecoins will be confirmed as government regulated. Presumably, this will become clearer when the summer consultation period is over.
It should be mentioned that not everyone is as passionate about crypto as the government. Even as the PR machine revs up, Andrew Bailey, the Governor of the Bank of England, warned this week that cryptocurrencies are the new “front line” in organized criminal fraud and that technology is an “opportunity pure and simple for the outright criminal” to exploit.
Finally, as Britons’ energy bills double or even triple overnight and with a further avalanche of increased costs set to hit them in the fall, the government has recognized that digital currency mining ( carried out by row after row of powerful energy generators – greedy computers) is intensive and in no way ecological or sustainable.
John Glen, Economic Secretary to the Treasury, said he was aware that cryptocurrency generation has a significant environmental impact and that he “will be looking closely at the energy consumption associated with certain crypto-technologies.” So that’s fine then. Perhaps he can be reminded that a new study by Bankless Times, a Canadian media company that covers “the alternative finance industry,” finds that Bitcoin mining costs 3.5 times more than Bitcoin. real gold mining. Or, to put it another way, cryptocurrency mining now pumps carbon emissions at a rate equal to that of the Czech Republic, yes, the entire country.