By Elizabeth Howcroft and Tom Wilson
LONDON (Reuters) – Cryptocurrency firm Tether said on Wednesday it will launch a “stablecoin” pegged to the pound sterling next month, a move that comes as London draws up plans to regulate digital currencies.
Stablecoins are cryptocurrencies designed to maintain a stable value against traditional currencies or commodities such as gold. These digital assets seek to avoid the volatility that makes bitcoin and other digital tokens impractical for much of the commerce.
Tether’s dollar-indexed stablecoin, based in the British Virgin Islands, is the third largest by market cap, with around $68 billion in circulation. The tokens are underpinned by a mix of dollars, government debt, and company-issued short-term debt.
As the collapse of the terraUSD stablecoin triggered a sell-off in cryptocurrency markets, Tether broke its 1:1 parity with the dollar, shaking investors’ faith in an important cog in the cryptocurrency economy.
The UK plans to put some stablecoins under the scrutiny of regulators, part of a plan to explore the potential of digital asset and blockchain technology to help consumers make payments more efficiently.
“We believe the UK is the next frontier for blockchain innovation and the wider implementation of cryptocurrencies for the financial markets,” Tether Chief Technology Officer Paolo Ardoino said in a statement, adding that the company will work with UK regulators. .
The UK Ministry of Finance did not immediately respond to a request for comment.
In addition to its dollar-backed currency, Tether offers tokens pegged to the euro, offshore yuan and Mexican peso.