S Pettigrove and M Bacina
UK kicks off crypto consultation
The Treasury of the United Kingdom (UK) has released a report outlining its plans for regulating the cryptocurrency and crypto asset industry. The report, titled "Future financial services regulatory regime for cryptoassets," confirms the UK's ambition to harness the opportunities presented by crypto technologies.
We believe that crypto technologies can have a profound impact across financial services. By capitalising on the potential benefits offered by crypto we can strengthen our position as a world-leader in fintech, unlock growth and boost innovation.
The report outlines the potential benefits of cryptocurrencies, such as increased financial inclusion and access to finance, as well as increased efficiency and reduced costs. The Treasury suggest that regulation should focus on activities rather than specific types of assets and should be adaptable to changes in the market.
While the UK plans to develop its regulatory framework within existing financial services laws, in practice, the country's lead regulator, the Financial Conduct Authority, will be given powers to write tailored rules as opposed to existing rules automatically applying to cryptocurrencies.
The proposed new regulatory regime for cryptoassets would include licensing requirements for firms engaged in crypto-related activities, such as trading, custody, and issuance. The regime would also require these firms to meet standards for governance, risk management, and security.
The government recognises the potential benefits of cryptoassets and DLT (distributed ledger technology), including increased financial inclusion and access to finance, as well as increased efficiency, reduced costs and increased market integrity
Meanwhile, the Government's thinking on DeFi appears to be at a relatively early stage. While indicating an intention to tackle regulatory arbitrage, the Treasury plans to embrace the opportunities posed by DeFi.
Overall, HM Treasury is looking for a proportionate, innovation friendly approach, which recognises distinct opportunities offered by new business models and encourages a thriving and well-regulated UK DeFi industry.
In addition to the proposed licensing requirements, the UK plans to implement measures to tackle market manipulation in cryptocurrencies. The report also discusses the importance of international cooperation in regulating the crypto asset industry. The UK Government plans to work with other countries to develop a coordinated approach to regulation.
The report provides a comprehensive overview of the UK Government's approach to regulating the cryptocurrency and crypto asset industry. The Treasury advocates for a balanced regulatory regime that encourages innovation while protecting consumers.
The release of this report marks a significant step forward in the UK's efforts to regulate the rapidly growing crypto asset market. The report highlights the UK Government's commitment to promoting the responsible use of cryptocurrencies and crypto assets while also protecting consumers and fostering innovation in the industry.