In the next weeks, the UK will announce its crypto regulatory plans

More On: Bitcoin

According to four industry insiders familiar with the topic, the UK government will shortly unveil measures to regulate the cryptocurrency market, focusing on a fast-growing type of token known as stablecoins.

The sources told CNBC that British Finance Minister Rishi Sunak is anticipated to make an announcement on a new regulatory system for crypto in the coming weeks, choosing to stay anonymous because the information hasn't been made public.

When contacted about the intentions by USA GAG, the Treasury declined to comment.

Sources who spoke to CNBC said the measures are likely to be advantageous to the business, offering legal clarity for a sector that has so far been mostly unregulated.

Treasury officials, according to the sources, have showed a willingness to learn about the complexities of the crypto market and so-called stablecoins, which are digital assets whose value is derived from current currencies such as the US dollar.

The department has been in contact with a number of businesses and trade associations. According to one of the sources, this includes the Winklevoss brothers' cryptocurrency exchange Gemini. The Gemini dollar is a stablecoin issued by Gemini that is tied to the US dollar.

Over the last several years, stablecoins have seen exponential development in terms of usage, coinciding with a surge in interest in cryptocurrencies in general. Tether, the world's largest stablecoin, now has a total circulating supply of over $80 billion, up from over $4 billion just two years ago.

Regulators are concerned that the tokens may not be fully backed by an equivalent amount of reserves, and that they are being used for money laundering and other illegal activities.

Meanwhile, regulators are concerned about the financial system's probable exposure to bitcoin and other digital currencies, as well as their potential use to circumvent sanctions placed on Russia as a result of its invasion of Ukraine.

Risks to financial stability

On Thursday, the Bank of England urged governments to broaden regulatory frameworks to mitigate the risks that cryptocurrency poses to financial stability.

In a letter to several bank CEOs, BOE Deputy Governor Sam Woods stated that banks and financial firms had expressed "increasing interest" in "joining various crypto markets."

According to the sources, the Treasury's move is seen as a response to President Joe Biden's executive order, which called for coordination between several US federal agencies on crypto regulation. Several industry insiders have criticized the United Kingdom's lack of such measures.

If they don't make it onto the Financial Conduct Authority's cryptoasset register by March 31, a number of companies, including Revolut, Blockchain.com, and Copper, could be forced to shut down their crypto activities in the UK this week.

According to the FCA, a "significant number" of crypto firms fail to meet anti-money laundering requirements. Only 33 businesses have been added to the list. More than 80% of enterprises reviewed by the regulator have had their applications withdrawn or refused.

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