UK Government Outlines A Detailed Plan To Begin Accepting Stablecoins As A Valid Form Of Payment

Stablecoins are among the most dominant digital assets in existence. They are primarily pegged at a 1:1 ratio with fiat currencies such as the United States Dollar (USD) to maintain a stable value. As a result, stablecoins generally remain indifferent to the extreme volatility of the broader crypto market, making them a promising financial tool for crypto enthusiasts, whether they are traders seeking to hedge against volatility or investors endeavoring to find new yield-generation opportunities.

The total market capitalization of stablecoins is currently hovering around $200 billion – a massive surge compared to the $38 billion recorded back in January 2021. Since most stablecoins maintain their “fixed” exchange rates by holding reserves (commercial paper, Treasuries, and other money market instruments), they have attracted scrutiny from regulators and financial institutions for potential financial stability risks.

While most countries are still pretty indecisive about how to regulate digital assets, the United Kingdom’s government has already started to implement its plan to transform the country into a global digital asset technology hub. As part of this initiative, the UK government has announced some new rules that will bring stablecoins within regulation, thus paving the way for recognizing stablecoins as a form of payment within the country’s borders.

According to the official announcement, the act of regulating stablecoins is part of the UK government’s vision of making the country the global hub for crypto assets technology and investment. To oversee stablecoins, the UK government plans to develop a “financial market infrastructure sandbox” to enable companies and startups to innovate. 

Additionally, the UK government will also set up a “Cryptoasset Engagement Group” to work closely with the evolving industry and work with the Royal Mint to launch NFTs. On top of it, the UK government also aims to explore novel ways of enhancing the competitiveness of the UK tax system to encourage further development of the digital economy.

Stablecoin and CBDC Project Funded By The UK Government

The UK government has been very progressive in realizing the potential of crypto assets, especially stablecoins and central bank digital currencies (CBDCs). For example, earlier this year, the UK government awarded significant funding to London-based blockchain startup Millicent as a UK Research and Innovation (UKRI) grant. This funding is being deployed to fuel the development of blockchain-powered solutions for several real-world use cases and assist the government’s efforts to launch the UK’s own CBDC.

The UK Research and Innovation (UKRI) Innovate UK SMART Award is among the country’s most competitive and prestigious awards. Winning this grant makes Millicent the first stablecoin and CBDC project to receive direct funding from the UK government. 

Led by Wall Street veteran and Harvard Business School alumni Stella Dyer and co-funded by the UK government, Millicent is a hybrid layer-1 blockchain infrastructure that employs Directed Acyclic Graph (DAG)-based consensus to facilitate the future of global finance. Owing to its DAG-based mechanism, Millicent can offer parallel transaction processing speeds of up to 10,000 TPS (transactions per second) alongside the composability and interoperability supplied by its Cosmos SDK-based blockchain modules. This unique combination enables Millicent to support super-fast and ultra-secure transactions at near-zero gas fees.

In addition to the $300,000 UKRI grant, the Millicent team has completed an angel equity round worth $300,000 and a pre-seed token sale led by AC Capital. Moreover, Millicent has entered into strategic partnerships with IBM, the Digital Euro Association, and is in early-stage discussions with Microsoft.

As a result of an outdated, fragmented, and inefficient infrastructure, the current global economic system is burdened with outrageous fees and sluggish settlements. While blockchain technology and cryptocurrencies aim to address these challenges to an extent, they are still far away from penetrating the mainstream market. 

By contrast, Millicent’s decentralized network enables seamless integration with existing open-banking financial frameworks globally, thus creating a universal financial infrastructure where transactions can be easily processed between on-chain and off-chain ecosystems without geographical restrictions.

The core vision of Millicent is to enhance, interconnect, and build upon existing legacy financial systems by supporting a diverse set of on-chain and off-chain use cases for users and institutions alike. Accordingly, Millicent offers support for issuing regulator-friendly and programmable stablecoins, Central Bank Digital Currencies (CBDCs), cross-border remittances, asset tokenization, and much more, helping drive institutional involvement in DeFi.

That said, it is important to understand that Millicent wasn’t awarded the UKRI grant solely because of its technology. Millicent’s vision of making a large-scale social impact also resonated with the awarding committee. The initiative’s open, inclusive, borderless, globally-connected, and low-cost financial infrastructure will play a key role in serving millions of globally unbanked and underbanked populations. Simultaneously, its open-source infrastructure empowers everyone to contribute to decentralized financial systems and solutions that will drive the next wave of financial innovation.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.