Crypto giant Tether to launch sterling-pegged stablecoin

Stablecoins are cryptocurrencies designed to keep a steady value against traditional currencies or commodities such as gold.

TerraUSD and Luna token holders who got the new coin -- known as Luna 2.0 -- in a so-called airdrop face a double whammy. (File Photo)

Major crypto firm Tether said on Wednesday it will launch next month a “stablecoin” pegged to the British pound, a move that comes as London draws up plans to regulate the fast-growing type of digital currency.

Stablecoins are cryptocurrencies designed to keep a steady value against traditional currencies or commodities such as gold. They seek to avoid the volatility that makes bitcoin and other digital tokens impractical for most commerce.

Crypto markets were rocked last month when the value of terraUSD, a stablecoin that used a complex algorithm, collapsed, throwing a spotlight on the importance of stablecoins to the crypto trading world.

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British Virgin Islands-based Tether’s dollar-pegged stablecoin is the third-largest by market capitalisation, with some $68 billion in circulation.

It is the predominant medium for moving funds between crypto and regular cash. Its tokens are underpinned by a mixture of dollars, government debt and short-term debt issued by companies.

As the demise of terraUSD sparked a sell-off in crypto markets, Tether broke its 1:1 peg with the dollar, shaking investors’ faith in a key cog in the crypto economy.

Britain plans to legislate to bring some stablecoins under the oversight of regulators, part of a plan to exploit the potential of crypto and blockchain technology to help consumers make payments more efficiently.

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It said in May it will adapt existing rules to deal with major stablecoin collapses.