The UK government intends to explore cryptocurrency and blockchain technology actively. But, more importantly, the UK aims to position itself as a global “crypto asset technology hub.” Several initiatives are underway to make that vision come true in the months to come.
A Bold Vision By The UK Government
Many people were surprised to learn about the UK government’s new cryptocurrencies and blockchain technology plans. Today, several plans are on the table, including a broader recognition of stablecoins and exploring non-fungible tokens. Bringing stablecoins into the regulatory fold can send a strong global signal. Moreover, it would enable these stablecoins to gain traction as a mainstream payment method across the United Kingdom.
Stablecoins have become a crucial part of the cryptocurrency industry. Although their values can not go beyond the price peg, they provide access to fiat currencies in a digital format. A stablecoin can be issued by a centralized entity – in the case of Tether’s USDT – or maintain its peg algorithmically, like DAI. Overall, most pegged currencies are tied to the US Dollar rather than the Pound Sterling.
Through the advent of decentralized finance (DeFi), anyone can create a stablecoin. More specifically, the minting of these currencies is possible by interfacing with a smart contract rather than an individual, company, bank, or government. The supply of these tokens can be adjusted on-demand through smart contracts as well. It is a popular concept for decentralized lending, where users put up cryptocurrencies as collateral for their loans.
As most stablecoins are decentralized, they will be tough to regulate. Bringing centralized issuers into the regulatory fold is easier than telling developers to adjust their smart contracts. However, a degree of regulation can bring more legitimacy to these pegged currencies, which may fuel broader mainstream adoption. Recognizing them as payment methods in the UK would create an intriguing precedent for the rest of the world.
Millicent Has The Government’s Backing
The news from the UK government is not entirely surprising either. Officials have pledged financial support to Millicent, a crypto and blockchain network attempting to make these technologies and solutions more accessible. Millicent intends to rewrite the code of global finance through a fast, interoperable, and regulator-friendly distributed network well-suited for the ongoing evolution of money.
Moreover, the network will span the enterprise and public blockchains, power traditional financial systems, support Central Bank Digital Currencies (CBDCs) and stablecoins, facilitate institutional DeFi access, etc. The project received a UKRI grant to begin the development of a British CBDC and a payment network. Those efforts further align with the UK government’s plans for stablecoins in the payment sector.
An alpha version of the Millicent testnet will be released soon, and the development of decentralized applications (dApps) will commence. The team is also working on Open Banking integrations, bridging the gap to traditional finance. A future iteration of the network will see institutional pilot programs, hackathons, and the deployment of currencies on the network.
The Royal Mint And NFTs
Another aspect the UK government aims to tackle is issuing non-fungible tokens (NFTs). Last week, the Treasury tasked the Royal Mint to create a non-fungible token. However, it appears this pertains to one particular asset rather than a collection of NFTs. Chancellor Rishi Sunak hopes to have the NFT ready for issuance by the Summer of 2022, although it remains unclear what its purpose will be.
Nor is it clear what image or object the NFT will depict ownership of. There is no indication this is a move to generate funds for the exchequer either, making many people wonder why the UK government will explore this option. However, the Treasury has confirmed it will release more information shortly.
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