LONDON (Reuters) – Tether, a major cryptocurrency company, announced on Wednesday that it will introduce a “stablecoin” tethered to the British pound the next month. The announcement comes as London develops plans to regulate the rapidly expanding kind of digital money.
Stablecoins are cryptocurrencies designed to have a stable value relative to conventional currencies or commodities like gold. They want to get around the fact that bitcoin and other digital assets are too volatile to be used in most business transactions.
The fall in the value of terraUSD, a stablecoin with a sophisticated algorithm, last month shook the crypto markets and highlighted the importance of stablecoins in the crypto trading industry.
With about $68 billion in circulation, Tether’s dollar-pegged stablecoin ranks third by market capitalization and is backed by the dollar.
It is the major method for exchanging crypto and fiat currency. Its tokens are backed by a combination of cash, government debt, and short-term corporate debt.
As the death of terraUSD caused crypto markets to sell off, Tether broke its 1:1 peg with the dollar. This made investors confidence in a key part of the crypto economy shaken.
The United Kingdom aims to enact legislation to bring some stablecoins under the supervision of regulators, as part of a strategy to leverage the promise of crypto and blockchain technology to enable customers to make more efficient payments.
It said in May that it would modify existing regulations to address major stablecoin failures.
In a statement, Paolo Ardoino, who is the Chief Technology Officer of Tether, said that the company would work with UK regulators.
The British Ministry of Finance did not reply immediately to a request for comment.
In addition to its dollar-backed coin, Tether also has tokens backed by the euro, the offshore Chinese yuan, and the Mexican peso.
