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The United Kingdom (United Kingdom) has launched a consultation on the new rules for the regulation of the crypto sector. The government intends to regulate cryptoassets, including commerce, lending and conservation, in the same manner as traditional (tradfi) finance.
The United Kingdom has planned on regulating cryptocurrencies and protecting consumers. H.M. Treasury issued a press release earlier today in which it opened consultation surrounding a set of “ambitious plans to robustly regulate cryptoasset activities – providing confidence and clarity to consumers and businesses alike.” The U.K. government’s actions to regulate cryptocurrencies have been driven by Prime Minister Rishi Sunak’s plans to attract more crypto business and investment in the country and to make the U.K. a global crypto-asset hub, and out of a need to better protect consumers against volatile market conditions such as those experienced in recent months.
U.K. Announces “Robust” Plans to Protect Consumers and Grow the Economy
As cryptoassets, or “crypto,” as they are more commonly known, are a new, diverse, and evolving class of assets that have so many benefits to offer; they do, however, come with risk to consumers. The nature of emerging technology markets, too, cryptography is still extremely volatile, and the recent failures of some of the top industry players have “exposed the structural vulnerability of some business models in the sector.” The United Kingdom argues that its strong approach to regulating the cryptography industry will mitigate some of the more important risks while taking advantage of the benefits of the digital asset market. The consultation was released on February 1, and the CRF will continue to receive answers until April 30.
Andrew Griffith, the Treasury Secretary, said in his press release:
We remain committed to growing the economy and encouraging technological change and innovation, including cryptoactive technology. But we also need to protect consumers who adopt this new technology - by guaranteeing strong, transparent and fair standards.
U.K.’s Approach to Regulating Cryptoassets is Consistent with its Approach to TradFi
The Treasury has said it will seek to regulate cryptoassets in an approach consistent with traditional finance. The UK's first rigorous regulatory approach is to place the responsibility for defining detailed content requirements for admission and disclosure documents in the hands of crypto trading platforms, ensure fair and rigorous standards for cryptography exchanges.
The government also proposed to strengthen the rules relating to financial intermediaries and depositories. These entities allow client crypto-assets to be processed and stored. The proposed Regulations also respond to industry concerns about the limited number of licensed crypto-asset companies with the authority to engage in financial activities that may issue their own promotions. According to reports by Bloomberg, many crypto companies raised concerns over the government’s proposals on cryptoasset promotion, arguing that firms which have already met the FCA’s standards should be able to issue their own advertisements without having an authorized third-party sign-off. In this regard, H.M. Treasury introduces a time-bound exemption to this rule. The exemption will allow cryptoasset businesses registered with the FCA for anti-money laundering purposes to issue their own promotions for the time being while the broader cryptoasset regulatory regime is being introduced.
FCA rejects the majority of crypto firms.
The United Kingdom should well receive the settlement proposed by H.M. Treasury, as issues with CFA have recently surfaced beyond those mentioned above. Recent reports revealed that the FCA has thus far only given regulatory approval to 41 of the 300 crypto-related companies registered with the agency. The agency made an announcement regarding the fact that only about 15% of companies have gained regulatory approval. Nevertheless, he did not give any decisive reason why the Office gave so little approval. The FCA said:
The FCA has been the anti-money laundering and counter-terrorist financing (AML/CTF) supervisor of U.K. cryptoasset businesses since January 10, 2020. Since then, we have received more than 300 applications under the Regulations and more than 260 as of January 2023. the demands that we have determined, 41 (15%) were approved and recorded, 195 (74%) were rejected or abandoned, 29 (11%) of the applications were rejected.
Worldwide regulation of cryptoassets looks imminent.
The United Kingdom's efforts to regulate the crypto industry are aligned with the global cryptoasset approach. In April, the European Union (E.U.) will have its final vote on its wide-ranging Markets in Cryptoasset bill (MiCA), while the Biden Administration announced a framework for reducing the risks associated with cryptoassets last week.
