The U.K. government published a consultation paper that outlines a strategy to reduce risk for investors holding stablecoins.
The proposal follows the collapse of algorithmic stablecoin TerraUSD (UST), which lost its 1:1 peg with the US dollar during a sell-off across the crypto market earlier this month.
The government recommends changing existing legislation to give the Bank of England power to appoint administrators to oversee insolvency arrangements with failed stablecoin issuers.
“Since the initial commitment to regulate certain types of stablecoins, events in cryptoasset markets have further highlighted the need for appropriate regulation to help mitigate consumer, market integrity and financial stability risks,” the Treasury said in its proposal, which will be considered by Parliament when time allows.
Regulators across the globe have shifted focus to stablecoins following Terra’s implosion, with the European Commission favoring a large-scale ban of the asset class.
The deadline for feedback on the consolation is Aug. 2.
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