Britain plans to regulate stablecoins first rather than the whole of the cryptocurrency market, Reuters writes.
According to John Glen, the country’s financial services minister, stablecoins could pose threats to financial stability if one private company ends up dominating the field.
Facebook’s move to introduce its coin Diem, known in 2019 as Libra, has brought concerns to governments and central banks about the possibility of a major competitor “emerging overnight.”
“There is the potential for some firms to swiftly achieve dominance and crowd out other players, due to their ability to scale and plug into existing online services,” Glen said, according to Reuters.
He said he believes the case for intervention is less important for now in the broader cryptocurrency market.
Stablecoins are designed to sidestep the usual volatility of cryptocurrencies. They have become the largest component of cryptocurrencies through trading volume, Glen said. And while there’s no one stablecoin that has become the biggest or most dominant, that could eventually happen, he said, according to Reuters.
Glen said the U.K. wasn’t looking to stifle innovation, but said the country had a “once-in-a-generation opportunity here to make vast strides in the efficiency of financial services, and ultimately benefit consumers and the economy as a whole,” according to Reuters.
The current largest stablecoin by market capitalization is Tether, which is a fraction of the size of bitcoin and not used very much for commerce.
Stablecoins are on their ways to becoming more mainstream, according to Jeremy Allaire, CEO of Circle, with the Office of the Comptroller of the Currency (OCC) saying that stablecoins can be used in banking transactions. Allaire said that came after the presidential working group said that dollar-based stablecoins could potentially help with improving efficiencies, boosting competition, lowering costs and helping to usher in a broader financial inclusion.
That said, those payments must also comply with regulatory frameworks and other such rules.