The government has announced strategies that will see stablecoins recognised as a valid form of payment and will be part of a series of measures to make the UK a global hub for cryptocurrency technology and investment. Stablecoins are a form of cryptoasset that is typically pegged to a stable currency, such as the US dollar, and is intended to maintain a stable value.
By recognising the potential of this technology and through regulation, the government can ensure financial stability and high regulatory standards so that these new technologies can be used reliably and securely. The measure aims to ensure that the financial services sector remains at the forefront of UK technology, attracting investment and professionals as well as widening consumer choice. This includes:
- the introduction of a 'financial market infrastructure sandbox' to allow firms to experiment and innovate in the provision of infrastructure services that support markets, in particular allowing the testing of Distributed Ledger Technology (DLT). This will enable data synchronisation and sharing in a decentralised way to achieve greater efficiency, transparency and resilience;
- the establishment of a Cryptoasset Engagement Group to work more closely with industry;
- the study of the industry to improve the competitiveness of the UK tax system to encourage further development of the cryptoasset market;
- and to work with the Royal Mint on the creation of a Non-Fungible Token (NFT), starting this summer, as an emblem of the forward-looking approach the UK has decided to take.
During a press conference on 4 April, the Chancellor of the Exchequer Rishi Sunak outlined the UK government's intentions to bet on the future of tomorrow's financial sector, with a particular focus on Blockchain technology, opening the door to cryptocurrencies. Regarding cryptocurrency taxation, the UK government is already working on ways to improve the competitiveness of the UK tax system to encourage the further development of the cryptocurrency market in the UK. It will review how DeFi loans - where cryptoasset holders lend them out for a return - are treated at a fiscal level. The government will also consult on extending the scope of the investment manager exemption to include cryptocurrencies.