The UK’s Financial Conduct Authority (FCA) “will absolutely need to take into account” the recent instability in crypto markets when beginning its work on a new regulatory framework for cryptocurrencies later this year.
This is according to Sarah Pritchard, FCA’s executive director for markets, who shared her view on the dramatic collapse of the TerraUSD (UST) stablecoin and its sister token LUNA last week.
“Innovation lasts if it works well, and clearly, we’ve seen the consequences and some of the issues that can arise,” Pritchard said in an interview with Bloomberg.
Pritchard also cited an Opinium survey published by the FCA last October, which claims that as much as 69% of adults below 40 years who invested in cryptocurrencies incorrectly believed that they were regulated by the FCA and, thus, were unlikely to understand the lack of investor protection and the risk to their money.
“It really shows at front of mind the really significant issues that exist here, both in terms of a well-functioning market and obviously consumer protection,” Pritchard said. “It shows the importance of making sure that people understand that that is a risk of where they put their money,” she added, pointing to the “significant price movements” in the markets.
FCA concerned by market volatility
As a result of the TerraUSD’s depegging from the US dollar last, the algorithmic stablecoin crashed from $1 below $0.15 and is now trading at even lower levels of about $.0.08, per CoinMarketCap.
The LUNA token, which once was worth more than $100 in April 2022, is currently worth less than a cent.
Bitcoin, which was used to maintain TerraUSD’s stability, has posted significant losses too. The leading cryptocurrency sold at almost $43,000 a month ago but plunged close to $26,000 last week. BTC is up roughly 3% in the past 24 hours though, changing hands at about $30,238 by press time.
Pritchard’s remarks come less than two months after the UK’s finance ministry announced ambitious plans to become a “global crypto asset technology hub.”
According to the Treasury’s April statement, these plans would see the existing legislation for electronic money and payments firms amended to include the issuance of stablecoins to be used as a recognized form of payment.
“We want to see the businesses of tomorrow—and the jobs they create—here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term,” the UK’s Chancellor of the Exchequer Rishi Sunak said at the time.
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