Following Wednesday’s (June 22) news that Tether, the world’s largest stablecoin issuer, is set to launch a new cryptocurrency pegged to the pound, businesses and traders will be keeping a close watch on developments in the United Kingdom.
“We believe that the United Kingdom is the next frontier for blockchain innovation and the wider implementation of cryptocurrency for financial markets,” Paolo Ardoino, Tether’s chief technology officer, said in a company press release.
On the subject of regulation, Ardoino added that “Tether is ready and willing to work with UK regulators to make this goal a reality,” a statement likely made in reference to the government’s plans to introduce stablecoin regulation later in the year.
And at the same time as the U.K. government is looking at regulating stablecoins, the Bank of England is also carrying out a consultation into blockchain technology and its possible application in the issuing of a Central Bank Digital Currency (CBDC).
Of course, Tether is not the only company with an interest in the U.K.’s evolving regulatory framework.
When it comes to using cryptocurrencies for day-to-day business transactions, many companies view regulation as a make-or-break issue. Data from the PYMNTS report, “Cryptocurrency, Blockchain, and Cross-Border Payments,” revealed that 48% of cross-border firms view the legal framework as a highly important variable for using cryptocurrency as a payment method.
Read the report: Cryptocurrency, Blockchain, and Cross-Border Payments
On the cross-border issue, stablecoins have made the transfer of funds between two parties in different countries cheaper, faster and more transparent than incumbent cross-border solutions, with the PYMNTS report showing that 29% of international companies now use them.
What’s more, in contrast to central bank digital currencies (CBDCs), stablecoins are easily accessible to people around the world. For example, while the anticipated digital pound may require a pound-based bank account to hold and be subject to the rules of the Bank of England, GBPT exists in a different asset class and will be subject to less stringent controls.
Trading the Stable Cable
Although Tether can’t take the credit for minting the first-ever pound-pegged stablecoin, it is certainly the biggest issuer to have done so yet. Given that USDT has a market cap of nearly $70 billion and is listed on pretty much every major crypto exchange, it seems likely that GBPT will follow suit.
As a result of this, a stablecoin version of one of the most traded currency pairs, GBP/USD, could soon be available.
Known among foreign exchange (FX) traders as “trading the cable,” according to FX intelligence platform fxssi.com, the GBP/USD pair currently accounts for 11% of all global currency trading.
The idiom has its origins in the mid-nineteenth century when currency quotes were communicated via the world’s first transatlantic telegraph cable between the U.K. and the U.S. Now that crypto traders will be able to hold currencies pegged to both the pound and the dollar, it seems likely that they too will get on the cable train.
Once again, however, regulators hold the key to the future and how they react will shape the emerging stablecoin-FX.
The PYMNTS cryptocurrency report also found that 36% of cross-border businesses see regulations as critical in the context of using cryptocurrency to manage foreign exchange.
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