Reading time: ~2 m
According to the FCA’s Executive Director for Markets, it is necessary to take into account the instability of the stablecoin market.
The UK’s financial regulator and its Ministry of Finance will scrutinise the collapse of the Terra ecosystem’s crypto tokens, creating new rules for crypto assets, Bloomberg reported on Friday.
The recent instability in the stablecoin market “must be taken into account” as the Financial Conduct Authority works with the Treasury to create regulations later this year, Sarah Pritchard, FCA’s chief markets officer, told Bloomberg.
On May 13, Terra’s algorithmic UST stablecoin fell to 23 cents, and the LUNA token, created to prevent volatility in the UST algorithmic stablecoin, fell by 96% at one point.
Algorithmic stablecoin is one that theoretically maintains its binding using only software and rules, meaning it is not necessarily collateralized.
Instead, programming a token or smart contract can increase supply if the price falls, or decrease the supply if the price rises.
In March, the UK said it would work on a new cryptocurrency regulatory package and plans to regulate stablecoins. During the consultation, the government proposed not to regulate algorithmic stablecoins.
#regulator #collapse #Terra #coins