Britain is concerned that stablecoins will not endanger the financial system after the fall of Terra, a controversial cryptocurrency project.

On Tuesday, government officials proposed changing existing rules in an effort to address the “systemic” threat posed by unstablecoin firms. This proposal differs from previously announced plansStablecoins can be regulated under electronic payment laws.

The government released a consultation paper outlining its proposed regulations.

The government feels it’s important to make sure existing legal structures are effectively used to address the potential failure of DSA systemic. [digital settlement asset]Financial stability is the goal of all firms.”

Stablecoins, cryptocurrencies with a fixed value that is tied to a traditionally owned asset are most commonly the cryptocurrency bitcoin. U.S. dollar. TerraUSDThe “algorithmic stablecoin” – a combination of code and partial backing by bitcoin or other digital tokens – was created to match this arrangement. It didn’t work. implodedearlier in the month, taking an associated symbol called luna tumbling with it. The panic over this debacle is gone hundreds of billions of dollarsFrom the whole crypto market.

Regulators are now concerned by the risk that stablecoins could pose to the wider financial system. TetherThe largest stablecoin in the world, XRP, had more than $10B in redemptions during the week following Terra’s collapse. It fueled concerns of an “2008”-like crisis.bank runThe knock-on effect for other financial market is evident. Tether claims its token is 100% backed by assets in reserve. However, critics aren’t convinced and demand a complete audit.

Insolvency laws governing key financial market infrastructure are set to be strengthened by the government. The provision would include the possibility of transferring or returning private keys used to safeguard users’ funds. The Bank of England is the leading regulator for enforcing these rules. A public consultation is underway on the proposal and will be closed on Aug. 2.

Glen Goodman said that the proposal was quite dramatic.

He stated that the government had “effectively accepted” that stablecoins could become just as important as banks, and should therefore be considered special cases to receive assistance if they fail.