The British Ministry of Finance proposes an insolvency regime to cope with the failure of stable coins

The British Ministry of Finance suggests an insolvency regime to cope with the failure of large crypto stable coins after the collapse of Terra sent shock waves through the global cryptomark at the beginning of this month.

The Bank of England would take the leadership in a consultation published on Tuesday, which the Finance Ministry suggested in Tuesday, the leadership in coping with the collapse of a stable coin that was systemic importance for the financial system.

StableCoins such as Tether and USD Coin investors offer an introduction to the cryptom market by providing a stable value memory compared to traditional currencies, in contrast to other volatile crypto tokens, including Bitcoin.

The Ministry of Finance said on Tuesday that the failure of a systemic stablecoin could endanger the "continuity of services that are crucial for the operation of the economy and that the access of individuals to their funds or assets" could endanger.

The supervisory authorities have focused on stable coins as a potential risk of the broader financial system, as the greatest coins indicate that they are covered by traditional assets. Financial guards also assume that these tokens could be used more often in transactions, since they are often faster and easier than established methods for sending money.

The collapse of Terra, a so-called algorithmic stablecoin that was developed to pursue the value of $ 1 without the support of a portfolio of reserves, has reinforced the concern of many supervisory authorities on the opaque and potential fragility of the market.

"The events in the markets for crypto systems have further underlined the need for adequate regulation in order to reduce the risks for consumers, market integrity and financial stability," said the Ministry of Finance on Tuesday.

The potential risks have also increased, since most stable coins are operated without the type of supervision that would be common under banks or other system -relevant financial institutions.

In the course of the 2008 financial crisis, the British supervisory authorities, of banks that are considered "Too Big to Fail", began to ask for them to create living orders that contain a timetable that can safely handle their shops if they get into an emergency.

The lenders must also keep certain reserves and take measures to strengthen the balance sheet to potentially prevent catastrophic "Runs" on the banks.

The British government said it would check whether a new legal framework is necessary to cope with the collapse of stable coins that are system -related payment systems or service providers. In the meantime, the Ministry of Finance proposed changes to the insolvency rules for payment networks to create a system that can handle the collapse of important stable coins in the future.

The Ministry of Finance said that the current system to cope with the collapse of a large payment network focuses on keeping these key elements of the financial infrastructure going in order to avoid disorders in day -to -day business. In the case of stable coins, however, the rules must also take into account that people often keep credit in these tokens. The government said that the new rules for stablecoins would "allow administrators to take into account the return of customer funds and private keys as well as the continuity of the service".

Great Britain has set itself the goal this year to become a global center for the burgeoning crypto industry. The government has announced that it intends to include stable coins in the wider regulatory framework for payments. Last month, Chancellor Rishi Sunak asked the Royal Mint to create a government supported by the government.