UK markets closed
  • FTSE 100

    7,550.37
    +8.52 (+0.11%)
     
  • FTSE 250

    19,887.79
    -248.86 (-1.24%)
     
  • AIM

    920.17
    -4.39 (-0.47%)
     
  • GBP/EUR

    1.1782
    -0.0041 (-0.34%)
     
  • GBP/USD

    1.1823
    -0.0109 (-0.92%)
     
  • BTC-GBP

    17,794.57
    -2,060.09 (-10.38%)
     
  • CMC Crypto 200

    504.88
    -36.72 (-6.78%)
     
  • S&P 500

    4,228.48
    -55.26 (-1.29%)
     
  • DOW

    33,706.74
    -292.30 (-0.86%)
     
  • CRUDE OIL

    89.91
    -0.59 (-0.65%)
     
  • GOLD FUTURES

    1,760.30
    -10.90 (-0.62%)
     
  • NIKKEI 225

    28,930.33
    -11.81 (-0.04%)
     
  • HANG SENG

    19,773.03
    +9.12 (+0.05%)
     
  • DAX

    13,544.52
    -152.89 (-1.12%)
     
  • CAC 40

    6,495.83
    -61.57 (-0.94%)
     

Rishi Sunak splits from Bank of England to pave way for crypto payments

·3-min read
Rishi Sunak Treasury - PETER NICHOLLS/REUTERS
Rishi Sunak Treasury - PETER NICHOLLS/REUTERS

Rishi Sunak is pushing ahead with a new law that will pave the way for everyday cryptocurrency payments despite fears at the Bank of England about the financial stability of the technology.

The Treasury confirmed it will bring forward new legislation that will recognise so-called stablecoins as a legal form of payment as part of the Government’s efforts to make Britain a “crypto hub”.

It said it will take the necessary steps to facilitate the use of stablecoins as a means of payment and get regulators to oversee the fledgling technology.

The move would open the door for companies to offer day-to-day transactions in stablecoins, which are cryptocurrencies designed to hold their value.

In its response to a consultation on crypto assets, the Treasury added: “The rationale for doing this is that certain stablecoins have the capacity to potentially become a widespread means of payment including by retail customers, driving consumer choice and efficiency.”

The Government said it will consult later this year on regulating a wider set of crypto asset activities.

However, the announcement came as Threadneedle Street warned that cryptocurrencies, including stablecoins, could pose a risk to financial stability.

Andrew Bailey, the governor of the Bank, said today: “Both the experience that we’ve had in recent weeks and also the work that we’re doing both domestically and internationally, I think further draws out that there are issues both in the unbacked crypto world and the so-called stablecoin.”

The Bank’s latest financial stability report also warned that “absent additional regulation, some stablecoins held to be used for payments may not offer similar protections to central bank or commercial bank money”.

The tension between the Government and the Bank over cryptocurrencies marks the latest rift between the two institutions, which have been at loggerheads over Brexit reforms and the cost of living crisis.

The warning from the Bank comes after crypto markets have crashed to such an extent in recent months that experts have started to question the future of the technology.

The Bank’s report said the total market value of crypto assets has fallen to $900bn from a peak of almost $3 trillion at the end of last year.

Stablecoins' backers say they offer potentially faster and more efficient payments than existing systems, but their rise has come under new scrutiny due to the collapse of Terra, a stablecoin designed to be linked to the dollar whose value collapsed in May.

TerraUSD, whose value was meant to be pegged to the dollar by an algorithm, collapsed to 2 cents amid a loss of confidence in its price mechanism. The rout led the price of Tether, the world’s biggest stablecoin, to waver, although it has since recovered.

In a sign of the growing chaos in crypto markets, Meta, the owner of Facebook, said it was shutting down its cryptocurrency digital wallet Novi less than a year after its launch, effectively ending the company's crypto ambitions.

Meanwhile CoinLoan, a crypto-backed loans provider, said it was cutting its daily withdrawal limit from $500,000 to $5,000 amid the market turmoil.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting