In a busy start to April 2022 for the British chancellor, Rishi Sunak announced his intention to make the UK a “global hub for cryptoassets technology”. Put simply, this means he wants the country to be an attractive place for cryptocurrency companies to operate.

For the government, this requires a delicate regulatory balance between preventing financial crime and protecting consumers, and allowing cryptocurrencies to flourish. If all goes to plan, greater engagement with the sector could result in a welcome boost to the UK economy.

It’s early days of course, and many central banks and economists remain unsure of the role cryptocurrencies should play in a nation’s financial makeup. But Sunak’s plans featured some eye-catching proposals, including removing tax barriers, and developing a non-fungible token (NFT) with the Royal Mint.

But the key element was a proposal to bring a particular element of cryptocurrencies, “stablecoins”, within the scope of existing UK banking regulation. Stablecoins are widely considered to be at the safer end of the sector, where the notorious volatility of other cryptocurrencies like Bitcoin is replaced with something more reliable.

So where Bitcoin’s value is derived purely from levels of confidence and demand, stablecoins are backed by other assets. Usually this means traditional currencies (usually the US dollar), but some are attached to commodities like gold. Either way, the aim is the same – to keep their value as close to constant as possible, making stablecoins more useful as a reliable medium of exchange.

Stablecoins may also have attracted the UK government because they offer fast transactions, at low cost and without borders. This allows users to make speedy global transactions with individuals and businesses, without the need to exchange currencies into a local tender.