Market instability in stable coins will require consideration, said the executive director of markets at the Financial Conduct Authority, alluding to the crash of Terra’s UST.
The Financial Conduct Authority, a UK regulator, and the Treasury Department will focus on the collapse of the Terra tokens, which will help set up more excellent policies regarding the crypto sector.
Recent market instability in stable coins will require more importance; The Financial Conduct Authority will work with the Treasury to set up better pólicies later this year.
Almost 70% of adults aged 40 and under who didn’t purchase crypto assets following the proper steps assumed that digital assets were under regulation, citing an Opinium survey highlighted by the FCA in October.
Consequences of this Crash
On May 13, Terra’s UST algorithmic stablecoin fell as much as 23 cents. The LUNA token founded to keep the UST algorithmic stablecoin from presenting volatile rates crumbled down to 96% at one point.
An algorithmic stablecoin keeps its parity by employing only software and policies, which means it doesn’t need any collateral support. Instead, the programming of the token, or smart contract, can make the supply grow if the price is crashing or minimize the pool if the price is reaching high peaks.
The two tokens had a combined market value of over $40 billion before the delisting, which wiped out at least $380 billion from the more comprehensive crypto sector.
History of a Regulation
In March, the UK said it would work on a new digital assets regulatory package to regulate stable coins. The government presented that algorithmic stable coins should not face regulations in its consultation.
In fact, in the annual speech of Queen Elizabeth of the United Kingdom a few days ago, the possibility of executing broader regulation of the crypto space arrived this year.
The Treasury said in April that it desires to amend existing procedures for electronic funds and payments businesses to include the management of stable coins and the provision of wallets and more extraordinary custody features.
According to Bloomberg, firms scratching the surface of regular coin activities could need Bank of England oversight and FCA clearance if their services get applied by many customers due to the systemic risks they could present.
Also, in March, the UK Advertising Standards Authority considered that 50 crypto entities should review whether they were breaking advertising policies.
By: Jenson Nuñez
