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Explore our latest insights to keep abreast of key legal developments. Keep up to speed on legal themes and developments through our curated collections of key content. Those of you following cryptoasset markets over the past week have seen one of the most dramatic events to date in an already volatile asset class. Over the last couple of days, during and following widespread cryptoasset price declines, UST de-pegged and has stayed stubbornly de-pegged despite the Luna Foundation Guard apparently starting to sell substantial quantities of its bitcoin at a significant loss, and LUNA collapsing in value.
This is one of the largest cryptoasset implosions to date and it certainly has implications across the cryptoasset space. So far so good, right? Everyone knows crypto is volatile and risky. It's early days and some experiments are bound to fail.
But imagine a future where stablecoins have a material share of payments services not to mention savings across the wider economy. In that world, a UST-style collapse could have real economic implications.
The UK Government proposes to address such risks by regulating stablecoins as e-money and subjecting the largest stablecoins to prudential regulation. Sounds very sensible at times like these. But the Government proposes to exclude "algorithmic stablecoins, or those that may be linked to assets other than fiat currency" from scope, on the grounds that they are similar to unbacked cryptoassets i. Coins like UST. In time, it's possible that such stablecoins could grow sufficiently to impact systemic stability despite being excluded from the regulatory perimeter.
