Terra Coins' Collapse to be Considered by UK Regulator in New Crypto Rules

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Bloomberg reported on Friday that the UK's financial regulator and finance ministry, the Treasury, will investigate the collapse of the Terra ecosystem's crypto tokens while developing new laws for crypto assets.

When the Financial Conduct Authority and the Treasury work on the guidelines later this year, Sarah Pritchard, the FCA's executive director for markets, told Bloomberg that recent market turbulence in stablecoins "will clearly need to be taken into account."

Terra's UST algorithmic stablecoin went as low as 23 cents on May 13, while the LUNA token, which was created to keep the UST algorithmic stablecoin from being volatile, dropped 96 percent at one point. In theory, an algorithmic stablecoin maintains its peg using solely software and rules, implying that it is not backed by collateral. Instead, the token's code, or smart contract, can raise supply when the price falls and decrease supply when the price rises.

According to a Treasury official, "recent occurrences in crypto asset markets have underlined the need for adequate regulation to assist manage consumer, market integrity, and financial stability risks." "As it develops its legislative strategy, the government will continue to cooperate with regulators to address these risks."

The United Kingdom announced in March that it will work on a new crypto regulation package and that stablecoins would be regulated. The government proposed that algorithmic stablecoins be unregulated in its consultation.

When CoinCryptoUS contacted the FCA on Friday, they were unavailable for comment.

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