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UK Treasury Opens Consultation into Proposed Insolvency Regime to Manage Failure of Stablecoin Firms | Cadwalader, Wickersham & Taft LLP

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On May 31, 2022, the UK Treasury announced a consultation on the government’s proposals to manage the failure of systemic digital settlement asset (“DSA”) (including stablecoin) firms by adapting the existing Financial Market Infrastructure Special Administration Regime (“FMI SAR”).

According to an article in the Financial Times, the Treasury stated that the failure of a systemic stablecoin could endanger the “continuity of services critical to the operation of the economy and access of individuals to their funds or assets.” The failure of the terra stablecoin has greatly intensified the concerns of many regulators over the lack of transparency and potential weaknesses of the market. The Treasury said that “events in cryptoasset markets have further highlighted the need for appropriate regulation to help mitigate consumer, market integrity and financial stability risks.”

The government considers that the Bank of England…

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