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Historic Legislation Targets Crypto Stability
In a major move to safeguard financial consumers and ensure market transparency, UK lawmakers have introduced comprehensive stablecoin reform legislation. The draft bill, published by HM Treasury on April 29, 2025, creates new regulatory frameworks for digital assets pegged to traditional currencies like the US dollar.
Key Provisions and Consumer Safeguards
The legislation establishes several new regulated activities including stablecoin issuance, custody services, and trading platform operations. Crucially, it mandates that:
- All issuers maintain 1:1 reserves with daily attestations
- Stablecoin providers obtain FCA authorization before operating
- Clear risk disclosures be provided to retail investors
- Robust anti-money laundering protocols be implemented
Addressing Market Risks
This initiative comes amid explosive growth in the stablecoin sector, with the global market cap exceeding $230 billion. Recent instability in unregulated stablecoins like TerraUSD highlighted vulnerabilities. Bank of England Deputy Governor Sarah Breeden emphasized the need for "singleness of money" - ensuring different currency forms remain freely interchangeable at face value.
Global Regulatory Context
The UK's move aligns with international efforts to regulate digital assets. The European Union's Markets in Crypto-Assets (MiCA) framework took effect last year, while US lawmakers debate the GENIUS and STABLE Acts. A key differentiator in the UK approach is its treatment of algorithmic stablecoins, which face stricter collateral requirements than under EU rules.
Industry Response and Next Steps
Crypto industry representatives have largely welcomed the clarity. "Proper regulation helps legitimate businesses flourish while weeding out bad actors," stated Digital Pound Foundation chair Jannah Patchay. The draft legislation enters a technical consultation period through May 23, with final implementation expected by Q4 2025.
