UK Government Details Plan To Regulate Crypto, Post FTX

The UK government has delivered on its promise for a plan to regulate the cryptocurrency market and the players therein.

Last December HM Treasury said it was finalising plans for a package of sweeping rules to regulate the troubled cryptocurrency industry.

Now HM Treasury has announced “ambitious plans to protect consumers and grow the economy by robustly regulating cryptoasset activities.”

Crypto regulation

The government noted that the crypto sector continues to experience high levels of volatility and a number of recent failures (most notably the collapse of FTX) have exposed the structural vulnerability of some business models in the sector.

The British government said its robust approach to regulation mitigates the most significant risks, while harnessing the advantages of crypto technologies. This, it stated, enables a new and exciting sector to safely flourish and grow, boosting jobs and investment.

“We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes cryptoasset technology,” said Economic Secretary to the Treasury, Andrew Griffith.

“But we must also protect consumers who are embracing this new technology – ensuring robust, transparent, and fair standards,” said Griffith.

The UK government’s widely-anticipated industry consultation that was launched Tuesday, proposes a number of measures aimed at bringing the regulation of cryptoasset businesses in line with that of traditional financial firms.

Among the proposals is a move designed to strengthen rules targeting financial intermediaries and custodians that store crypto on behalf of clients.

This is not surprising considering the events of 2022, which witnessed the rise of risky loans made between multiple crypto firms and a lack of due diligence done on those involved in those transactions.

HM Treasury also proposes to crack down on such activities, and looks to establish a “robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms.”

Another proposal is the enforcement of tougher transparency requirements on crypto exchanges to ensure they publish relevant disclosure documents and set out clear admission requirements for trading digital tokens.

Another proposal is the relaxation of strict rules on crypto advertisements, allowing firms with Financial Conduct Authority registration for anti-money laundering purposes, to issue their own promotions while the broader crypto regime is being introduced.

The government’s consultation will close on 30 April 2023, after which, the government will consider feedback and work to set out its consultation response.

Once legislation is laid, the Financial Conduct Authority will consult on its detailed rules for the sector

UK crypto ambition

The UK seeks to become a leader in crypto and blockchain technology, and is considered to have a crypto-friendly prime minister in the form of Rishi Sunak.

The United Kingdom in April 2021 admitted that it was exploring the potential of creating a digital currency backed by the Bank of England.

Then Chancellor (now Prime Minister), Rishi Sunak had asked the Bank of England and HM Treasury to look at the case for a new “Britcoin”, which has seen the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to “co-ordinate the exploration of a potential UK CBDC.”

Then last month Financial Services Minister Andrew Griffith said that getting the design of a digital pound right is a bigger priority than a rapid launch.