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The proposed British laws to regulate cryptography suggest that the jurisdiction could surpass its rival, the European Union, in the race for governance of the sector.
long-awaited consultation, originally promised for before Christmas, was published on Wednesday. The much-anticipated consultation, initially promised before Christmas, was made public on Wednesday.
It proposes a new licensing scheme for any undertaking operating in the UK or serving local customers – and has received an immediate and largely positive response from the industry.As the voice of the U.K.’s crypto sector we welcome this positive step towards greater regulatory clarity,” said Ian Taylor, board advisor of lobby group CryptoUK. As the spokesperson for the cryptography sector in the United Kingdom, we welcome this positive step towards greater regulatory clarity," said Ian Taylor, Board Advisor to the CryptoUK lobby group. "
"In view of the provisions of the bill, it could not be more essential to consult the industry."
“Binance has vocally supported the need for effective and appropriate regulation to help with mainstream adoption of digital assets,” the company tweeted. "Binance has been adamant about the need for effective and appropriate regulation to support the adoption of digital assets," the company tweeted.
We look forward to the Government of the United Kingdom's next steps in achieving this."
Crypto should be brought under existing rules laid out in the Financial Services and Markets Act (FSMA) dating back to 2000, the Treasury said – arguing that the alternative of a bespoke regime, of the kind introduced in the EU by the Markets in Crypto Assets regulation (MiCA), would overlap, distort competition, and create confusion.
Cryptography should be subject to the requirements of the Financial Services and Markets Act (FSMA) since 2000, Treasury said, arguing that an alternative to a tailor-made diet, of a type introduced into the EU under the Markets in Crypto Assets (MiCA) regulation, would overlap, distort competition, and confuse people.
As such, Under the new regime, crypto companies would have to register, abide by the rules established by the Autorite in matters of financial conduct, and to comply with the rules for combating financial crime which are stricter than the regulations on money laundering (MLR) under which companies are approved now.
Companies have already complained about lengthy delays and tough FCA procedures under the existing money-laundering rules. Just 41 companies out of a total 300 that applied under the existing system succeeded in gaining regulatory approval, and now face the prospect of having to seek additional authorization.
The new regime has a broad scope in terms of geography, crypto types, and activities. Foreign trading venues may be forced to create a subsidiary in the country because of their 'critical role in the crypto asset value chain,' the paper said. It would also apply to useful and non-figuble tokens (nfts) if used for financial services such as loans, payments or investments.
Currently, CFA only monitors UK-based businesses that operate a crypto entity in Canada. Expanding it to anyone who serves customers in the United Kingdom may be important – This means that some of those 300 businesses that chose to go overseas after not registering would now have to get permission from CFA to serve domestic clients.
Crypto lenders would have to have clear contractual terms and adequate financial resources – to avoid a repeat of collapses like CelsiusVoyager. This suggests that the UK may outperform its rivals in the EU, since mica does not cover crypto loans.
The Treasury also wants to include a market abuse regime to prevent illicit activity from happening and to sanction practices that manipulate prices via pump and dump schemes, fake activities such as wash trading or anticipating trades through front running.
As far as the stabilizers linked to fiduciary currency are concerned and used as a means of payment, the regulations are already defined in the existing draft law on financial services and markets, and the next step in developing the rules would cover a wide range of activities such as exploiting an exchange, investment, crypto ready and safekeeping. Algorithmic stablecoins like the ill-fated terraUSD are deemed risky and potentially volatile, and should be treated like other unbacked cryptos such as bitcoin (BTC), the document said.
A further third tranche of activities including crypto mining, post-trade activities like clearing and decentralized finance could be left until later, the paper suggested, while a few other areas – like whether to regulate crypto staking and how to advertise the environmental impacts of crypto – still hang in the balance.
'There may not be any justification for regulating mining activity itself,' said the consultation.
He added that he was interested in considering rules in related areas like the extractible value of miners – where miners choose how to sequence transactions to maximize the profits of other traders. The consultation brings to light the problems related to the supervision of decentralized finance—a company without borders where there is no obvious entity to regulate.
The consultation sheds light on the problems associated with the supervision of decentralized finance—a company without frontiers in which there is no obvious entity to regulate.
