Britain plans new safeguards for stablecoins that go bust in wake of Terras collapse
Summary
Britain wants to make sure stablecoins dont end up threatening the wider financial system following the collapse of controversial crypto project Terra. "The government considers that it is important to ensure existing legal frameworks can be effectively applied to manage the risks posed by the possible failure of systemic DSA [digital settlement asset] firms for the purposes of financial stability." TerraUSD, a so-called "algorithmic" stablecoin, was meant to follow this arrangement using a mix of code and partial backing from bitcoin and other digital tokens. Tether, the worlds biggest stablecoin, saw more than $10 billion in redemptions in the weeks following Terras collapse, fueling fears of a 2008-style "bank run" with knock-on effects for other financial markets. Though Tether says its token is fully backed by assets held in a reserve, critics remain unconvinced and have called for a full audit.