By Huw Jones and Tom Wilson
LONDON (Reuters) – Britain will initially focus on regulating stablecoins rather than the broader cryptocurrency market given the risk of too little competition, UK financial services minister John Glen said on Tuesday.
Facebook’s move in 2019 to introduce its own stablecoin Diem, then known as Libra, raised concerns among governments and central banks that a major payments competitor could emerge overnight.
“We need to manage risks to competition,” Glen told a City & Financial conference.
“There is the potential for some firms to swiftly achieve dominance and crowd out other players, due to their ability to scale and plug into existing online services,” Glen said.
“We believe the case for intervention in the wider cryptocurrency markets is less immediately pressing.”
Stablecoins such as the planned Diem – currently seeking approval in Switzerland – are designed to avoid the volatility typical of cryptocurrencies like bitcoin, making them in theory more suitable for payments and money transfers.
Glen said stablecoins have become the largest component of cryptocurrencies by trading volume, and while no globally systemic player has emerged so far, this could change rapidly.
The largest stablecoin by market capitalisation, Tether, is a fraction of the size of bitcoin, and is little used for commerce.
Britain will not hold back innovation or be protectionist when it comes to using distributed ledger technology, which underpins cryptocurrencies such as bitcoin, Glen said.
“We have a once-in-a-generation opportunity here to make vast strides in the efficiency of financial services, and ultimately benefit consumers and the economy as a whole,” he said.
(Reporting by Huw Jones and Tom Wilson; Editing by Shri Navaratnam)
