UK PM Liz Truss Faces An Economic Crisis: Is Crypto-Friendly Policy In The Cards?

Liz Truss, the 56th Prime Minister of the United Kingdom and Northern Ireland, is the third woman to hold the position after she received 81,326 votes to former Chancellor of the Exchequer Rishi Sunak's 60,399.

Now that she is Prime Minister, replacing Boris Johnson, Truss will be tasked with solving the U.K.'s economic hardships, especially the cost of living problem. This will determine both the course of her premiership and her chances of winning a personal mandate in the general election that follows.

The crypto industry is especially curious to see how Truss will approach digital currencies.

Truss, in 2019 when she held the position of chief secretary to the Treasury, said via Twitter that "we need to accept cryptocurrencies" in a way that does not restrict their potential and that by getting rid of regulations that stifle free enterprise, we can liberate it.

Since then, however, Truss has not offered any specific policy recommendations or made many comments regarding cryptocurrencies or blockchain technology.

See Also: Who Is Liz Truss? What Investors Should Know About UK's Third Female Prime Minister

It is also unknown if Truss will continue Sunak's efforts to establish the U.K. as a crypto center. The next Chancellor of the Exchequer that she appoints may have an effect on crypto regulations in the U.K. Truss is currently lining up a Cabinet.

Recall how Sunak helped create the groundwork for a new Financial Services and Markets bill that may include stablecoins and other payment-focused cryptocurrencies under the purview of regulation.

The legislation aims to "reduce red tape" and open the banking sector up for expansion after Brexit.

A recent survey found that the U.K. is among the top global leaders in the use of cryptos, just after the U.S. and Ukraine.

The study took into account the number of cryptocurrency users in the country, the worldwide adoption of decentralized finance (DeFi), the number of merchants accepting cryptocurrency payments, the number of Bitcoin (BTC) ATMs, and the volume of monthly cryptocurrency search phrases.

In August, a U.K. Parliamentary Group launched an investigation into additional regulation of the industry in light of the expanding crypto sector.

In a study from Kwasi Kwarteng's department from June 2021, blockchain systems were included as one of the "seven technology families that will alter our economy in the future.”

Kwarteng is the current secretary of state for business, energy, and industrial strategy and a supporter of Truss.

A 53 million British pound sterling ($61.3 million) initiative for fostering technological innovation, including the application of blockchain to supply chains, was launched by his department in July.

See Also: Why Did Boris Johnson Resign As UK Prime Minister?

According to the Bank of England, the growth of an open and decentralized metaverse may scale up the existing risks from crypto assets and could cause financial instability in the real world.

Reiterating the volatile nature of cryptos' amplification of losses due to overleverage, Bank of England researchers Owen Lock and Teresa Cascino recently stated that a major fall in the price of cryptos could lead to “balance sheet losses for households and corporates, an impact on unemployment, fire-sales of traditional assets from non-banks to meet margin calls on crypto asset positions, and negative profitability impacts on the exposed bank.

Following the collapse of the Terra blockchain and its native token Luna, which wiped out billions of dollars worth of investors' money, the U.K. government in May this year had released a Consultation Paper on stablecoins, to mitigate financial stability issues that may materialize should a firm that has reached systemic scale, fail.

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