Stablecoins have played a crucial role in the widespread adoption of cryptocurrencies. They have been the gateway and bridge that has connected FIAT currencies to the cryptocurrency market. 

However, despite the ongoing bear market, stablecoin companies like Tether have chosen “Expansion all the way” as their mantra. Tether, the largest stablecoin by market cap, is expanding its stablecoin offering to the United Kingdom by launching a new British pound pegged stablecoin. The ticker symbol for this new stablecoin will be GBP₮. 

The stablecoin will be Tether’s fifth stablecoin and will join the U.S. dollar-pegged USDT, Euro-pegged EURT, offshore Chinese yuan-pegged CNHT and the Mexican peso-pegged MXNT that was launched last month.

How has Tether USDT been performing throughout the bear market?

British pound pegged stablecoin  is coming to the united Kingdom

The 2022 bear market has been brutal to stablecoins but most of all to Terra UST and Tether USDT. Although there are many reasons for the downtrend, one of the main theories is the collapse of UST, Terra’s stablecoin.

Terra was built by Terraform Labs, a South Korean software company, and it’s an algorithmic stablecoin. This simply means that instead of being backed by traditional assets or cryptocurrencies, stablecoins utilise different algorithms to maintain its value.

Although the main reason for the UST crash has not been determined, some experts like David Lawant believe it became too challenging to maintain an algorithmic stablecoin model during such bear markets, leading to its de-peg and collapse.

As a result of Terra’s UST collapse and price instability, the number of dollar-pegged Tethers or USDT in circulation also dropped significantly in recent months, pushing most USDT traders and hodlers to sell. Tether was hit harder than its rivals like Circles’ USDC, and it lost its peg to the U.S. dollar slightly.

Furthermore, according to data from Coingecko, the total USDT in circulation has dropped from $83 billion in early May to $67 billion at the time of writing. However, despite this fall, USDT still retains its place as the largest stablecoin by market cap. 

Stablecoin regulation and CBDCs in Europe and the United Kingdom

UK government building

The new GBP-backed stablecoins come at a strategic time as the central banks in Europe, and the United Kingdom are developing a CBDC and formulating stablecoin regulations. The announcement came on Wednesday, June 22, 2022, and the Tether team stated that GBP₮ would be built by the same development team behind USDT and operated under the same website. 

According to Paolo Ardoino, chief technology officer at Tether, the U.K.’s ambition of becoming a cryptocurrency hub was another reason the country is an attractive destination. Moreover, the United Kingdom’s Economic and Finance Ministry, under the existing e-money legislation, also planned to amend its regulatory framework to include stablecoin as a payment method. However, this does not imply that stablecoins will be considered a legal tender. 

Will the British pound pegged stablecoin GBP₮ survive the increased scrutiny around stablecoins?

As we mentioned above, the recent bear market might have just removed the “Stable” in stablecoin. Initially, stablecoins were not under the purview of regulators, and since they were pegged to the major currency pairs, most regulators viewed them like their FIAT counterparts. However, the dramatic downfall of Terra Luna and UST resulted in a lot of doubt and questions regarding stablecoins. 

However, since UST was an algorithmic stablecoin, USDT, which is backed by assets in its reserve, might not fall into a similar pitfall. Following this fiasco, the U.K. government published a consultation paper that was focused on minimizing the risk of holding stablecoins. In response, CTO Ardoino stated, “Tether is ready and willing to work with U.K. regulators to make this goal a reality and looks forward to the continued adoption of Tether stablecoins,”

What might this mean for U.K.’s cryptocurrency community?

In April 2022, the U.K. government said it hoped to become a global hub for blockchain, cryptocurrency technology, and investments. This means that, unlike many other countries that take a relatively negative approach, the U.K. government is open to being a hub for blockchain and cryptocurrency innovation. With proper regulations and working relations between Tether and the U.K government, GBP₮ will open up the crypto space in the U.K.

As such, crypto experts and businesses stand a chance to tap into blockchain and cryptocurrency as a mode of operation in the country. The GBP₮ stablecoin also gives U.K. citizens direct access to a store of value that allows them to reduce the volatility of other digital currencies. Furthermore, with its native stablecoin, the U.K. crypto community will have smoother asset transfer options and more accessible peer-to-peer conversions.