On Wednesday, Major crypto firm Tether confirmed that it will launch a “stablecoin” pegged to the British pound next month, a move that comes as London plans to regulate the fast-pace and growing type of digital currency
A Stablecoin is a cryptocurrency designed to keep a steady value against traditional currencies or commodities such as gold. They aim to avoid the volatility that makes bitcoin and other digital tokens impractical for most transactions.
Last month, Crypto markets were rocked when terraUSD collapsed, a stablecoin that used a complex algorithm, highlighting the importance of stablecoins to the crypto trading world.
British Virgin Islands-based Tether’s dollar-pegged stablecoin is the third-largest by market capitalisation, with around $68 billion in circulation.
This is the most common method to transfer funds between crypto and regular cash. The tokens are backed by a combination of dollars, government debt and short-term debt issued by companies.
As terraUSD fell, sparking a sell-off in crypto markets, Tether broke its 1:1 peg with the dollar, shaking investors’ faith in a key component in the crypto economy.
In order to help consumers make payments more efficiently, Britain intend to legalize some stablecoins under regulatory oversight, part of a plan to exploit the potential of crypto and blockchain technology.
In May, it said it will adapt existing rules to deal with major stablecoin collapses.
“We believe that the United Kingdom is the next frontier for blockchain innovation and the wider implementation of cryptocurrency for financial markets,” Tether Chief Technology Officer Paolo Ardoino added that the company would work with UK regulators.
Additionally to its dollar-backed coin, Tether offers tokens pegged to the euro, offshore Chinese yuan and Mexican peso.