On Monday, the United Kingdom set out a detailed plan for utilizing the potential of cryptoassets and the underlying blockchain technology to make payments more efficient for consumers. UK's Chancellor of the Exchequer, Rishi Sunak, said in a prepared statement, "It's my ambition to make the UK a global hub for cryptoasset technology, and the measures we've outlined today will help to ensure firms can invest, innovate and scale up in this country."
As part of creating a global cryptoasset technology hub, stablecoins would be "brought within regulation" so that they can be used "in the UK as a recognized form of payment." Stablecoins are a type of cryptoassets usually pegged to a fiat currency like the dollar and are intended to maintain a fixed value. Thus, the volatility can be avoided that makes Bitcoin and other cryptocurrencies impractical for commerce. According to the UK's finance ministry, "The approach will ensure convertibility into fiat currency, at par, and on demand."
Chancellor @RishiSunak has asked @RoyalMintUK to create an NFT to be issued by the summer.— HM Treasury (@hmtreasury) April 4, 2022
This decision shows the the forward-looking approach we are determined to take towards cryptoassets in the UK. pic.twitter.com/cd0tiailBK
Moreover, the government plans to work with the Royal Mint, the producer of the UK's coins, to create a non-fungible token and issue it by the summer. It will act as an emblem for the UK government's forward-looking approach. In addition, a "financial market infrastructure sandbox" will be launched by the Bank of England and FCA next year. The regulatory sandbox will be designed to help firms innovate in the industry.
While the implications of crypto tax are studied, the Law Commission will also be considering the legal status of decentralized autonomous organizations using the blockchain. Also, the tax treatment of DeFi loans, where cryptoassets are lent out for an interest, will be reviewed. The financial services minister John Glen stated, "On balance, we don't think the tax code will need major surgery to make it work more easily for crypto."
The government press release reads, "By recognizing the potential of this technology and regulating it now, the government can ensure financial stability and high regulatory standards so that these new technologies can ultimately be used both reliably and safely."
The UK government also plans on exploring blockchain technology and its implementation in the broader financial markets. The government press release states that this technology might "potentially achieve greater efficiency, transparency, and resilience."
While regulators worldwide are trying to grapple with cryptocurrencies, the European Union already has a draft law on crypto markets. With the UK recognizing and integrating stablecoins as a valid form of payment, we are one step ahead in the global crypto adoption.