The UK finance ministry is about to propose new rules for governing the crypto sector – and wants the industry to weigh in.
His Majesty’s Treasury is about to publish a set of proposals via consultation on Wednesday to ask feedback from members of the crypto industry, and crypto experts, focusing on consumer protection rules, and aspirations for the country to become a hub for crypto.
In the highly anticipated document, some of the proposals put emphasis on crypto exchanges to define and detail responsibilities and requirements for admission and disclosure documents, according to the Treasury.
In addition, the Treasury is proposing rules to set up a regime around the lending of crypto assets – which will affect financial intermediaries like custodians.
The Treasury is also seeking feedback for a “market abuse regime”, aimed to improve market integrity, consumer protection, and operational resilience for crypto firms. The treasury also will propose prudential and data reporting requirements for crypto companies.
“We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes crypto asset technology,” Andrew Griffith, economic secretary to the Treasury, said in a press release. “But we must also protect consumers who are embracing this new technology – ensuring robust, transparent, and fair standards.”
Crypto regulation has become in demand from lawmakers around the globe, after the collapse of stablecoin issuer Terra and crypto exchange FTX wrecking havoc across the industry.
The UK’s local crypto industry has been long hoping for clarity on how to continue business operations before rules are put into place. Amongst these concerns include how the industry should continue handling advertising and promotions – which in the latest set of proposals indicated that such activities were not allowed without approval.
In the announcement made Tuesday, the Treasury declared it will introduce a “time limited exception” that will grant crypto businesses and firms that are registered with the UK’s regulator – the Financial Conduct Authority (FCA) – the ability to issue their own promotions while more regulatory clarity is to be rolled out.
The UK finance ministry is expecting to finalise its Financial Services and Markets Bill (FSM) by April, which may grant crypto regulators more areas of oversight. It is currently being debated in Parliament. If it is passed as is, crypto will be treated as a regulated activity, with the FCA and the Payments Systems Regulator to look after the crypto sector and its customers. As of writing, the FCA can only have crypto companies register with it to comply with its anti-money laundering rules.
Local crypto advocates feel that the rules under the FSM bill may be too restrictive. A November amendment to the FSM bill adds that any advertisement or invitation involving an investment activity to gain consumers must be approved by an authorised entity – meaning crypto firms may have to budget for high costs for approval to advertise.
The UK is lagging behind the European Union – which has developed a set of landmark regulations which puts a reserve requirement for stablecoin issuers, and a licensing regime for businesses that hope to offer crypto services. The Markets in Crypto Asset regulation, or MiCA, is seen to set the standard for crypto regulation internationally, and is expected to go into effect in 2024.
This consultation session will be open until April 30, 2023, when the government will consider and work with submitted feedback.
