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The economic secretary to the Treasury told MPs that the government is thinking about creating a national cryptocurrency or “digital pound.”
Andrew Griffith said the UK was determined to become the world’s center for crypto.
And the government was “a long way from setting up a way for stablecoins to be used by many people as a way to pay.”
Stablecoins are made so that their value is based on traditional currencies or assets like gold.
Technology that makes a difference
Mr. Griffith told the Treasury Select Committee that in the next few weeks, people would be asked what features a digital pound should have.
“I want us to set up a system so that stablecoins can be widely used as a form of payment,” he said. This is part of the Financial Services and Markets Bill, which is being discussed in Parliament now.
Digital currencies are being made or looked into by central banks all over the world.
And Mr. Griffith added, “It is right to try to use potentially disruptive technologies, especially when our fintech and financial sectors are so strong.”
He said he wanted to try this “potentially disruptive game-changing technology” because it could “challenge but also turbocharge all of those industries.”
Keeping the consumer safe
People are worried about whether any cryptocurrency can ever be considered stable after the “crypto winter,” when the value of Bitcoin and other assets dropped quickly.
It could also make a lot of policy questions come up.
There will also be talks about Britain’s first general plan for regulating crypto assets, which have become a focus of consumer protection concerns in recent weeks.
But the consultation will be part of a “research and exploration phase,” which will help the Bank of England and the government make plans for the next few years.
Given the UK’s “strong financial reputation,” Mr. Griffith told the committee that it was more important to get crypto regulation right than to be the first to do it.
He said, “The planning will take a long time.”
The EU has made the first full global rules for regulating the crypto markets.
If they get final approval in the next few weeks, they will take effect in 2024.
Mr. Griffith said that UK rules could be changed to include decentralized finance and that more openness would benefit everyone.
He told the committee, “We want the right system, run in the right way, with the right checks and balances.”
He also promised to hold “at least” six roundtables with people in the cryptocurrency industry to “showcase us as regulators and decision-makers.”
The UK Treasury will govern some stablecoins
The Treasury has said it will regulate some cryptocurrencies as part of a larger plan to make the UK a hub for digital pay companies.
It said that “stablecoins” would be accepted as a form of payment to make people more comfortable using digital currencies.
Stablecoins are designed to have a stable value tied to traditional currencies or assets like gold.
People think they’re less risky than cryptocurrencies like Bitcoin.
The Treasury also said it wanted to hold a public meeting later this year to talk about how to regulate a much wider range of digital currencies, but it has yet to say which ones.
The Treasury hasn’t said yet which stablecoins will have to follow the rules. But Tether and Binance USD are two that people know about.
Stablecoins make it easier for people in the United States to trade, lend, or borrow other digital assets.
But they do not agree on everything. For example, people have asked how the Hong Kong-based company Tether does business. In 2021, it was fined $41 million by a US Commodities Futures Trading Commission for allegedly lying about how much money it had on hand.
The UK’s Treasury said that by making rules for stablecoins, people would be able to use them “safely.”
Cryptocurrencies are digital or virtual currencies that can be traded or used like traditional currencies. to buy goods and services. However, only a few stores accept them yet, and some countries have banned them completely.
They are traded directly between people, so no banks or third parties are involved.
Because the value of some digital currencies changes in strange ways, regulators have warned that they pose risks. But they are becoming more popular, and big financial companies are now investing in them.
Elon Musk, the founder of Tesla and the world’s richest person, has said that virtual currencies like Bitcoin are “good.”
Financial and environmental concerns due to cryptocurrency
Regulators are in a hurry to devise rules for how to deal with cryptocurrencies because there is concern that their growing popularity could threaten the current financial systems.
In December, the deputy governor of the Bank of England said that only about 0.1% of the UK’s wealth was in digital assets, but that number was growing quickly.
Sir Jon Cunliffe told the BBC that if the value of cryptocurrencies dropped sharply, it could cause a chain reaction.
In the meantime, the US is working on rules because there are growing concerns that criminals can hide in the cryptocurrency industry.
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Mining is making digital coins with a group of powerful computers, which uses a lot of energy. Recent research shows that Bitcoin now produces as much carbon as the entire country of Greece.
Mr. Glen said there were worries about the environmental effects and that the government “will look closely at how much energy certain crypto-technologies use.”