The UK Treasury won't legalize algorithmic stablecoins as they fail to guarantee stability, The Telegraph has learned, citing a spokesperson for the Treasury.
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Although the spokesman didn't specifically name terraUSD (UST), it appears apparent that the Treasury doesn't want to deal with stablecoins backed by crypto like bitcoin (EXANTE: Bitcoin):
"The Government has been clear that certain stablecoins are not suitable for payment purposes as they share characteristics with unbacked crypto assets. We will continue to monitor the wider crypto asset market and stand ready to take further regulatory action if required."
UK's finance minister Rishi Sunak believes the move will help the UK financial services industry to stay "at the forefront of technology and innovation."
The move comes after UST, an algorithmic stablecoin on the Terra blockchain, lost its $1 peg, dropping to $0.15. Amid price fluctuations, Terraform Labs, the company behind Terra, several times suspended blocks generation to prevent governance attacks following severe LUNA inflation and a significantly reduced cost of attack.
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