The UK Treasury has released a long-awaited consultation paper for regulating cryptocurrencies. The 80-page document covers a wide range of topics, from issues surrounding algorithmic stablecoins, non-fungible tokens (NFTs), and initial coin offerings (ICOs).
As stated by the Treasury, the proposals aim to put the UK financial services sector at the forefront of the emerging sector, avoiding certain restrictive control measures that have taken hold globally during the current crypto winter.
The Treasury has announced that there will be no separate regulatory regime for cryptocurrencies, but which will fall under the framework of the UK’s Financial Services and Markets Act 2000 (FSMA). The goal is to align cryptocurrencies with traditional finance. However, the UK’s top financial regulator, the Financial Conduct Authority (FCA), will adapt the rules of the existing FSMA to the digital asset market.
The decision involves at least one hassle: the requirement for cryptocurrency market participants to go through the registration process again. They have already had to undergo the procedure under the FCA’s licensing scheme, but will now have to be assessed “under a wider range of measures”.
The good news is that, unlike traditional finance, crypto companies won’t have to report their market data on a regular basis. However, exchanges will be required to keep such data and make it available at all times.
The Treasury has departed from some of its international counterparts, reporting that it has no plans to ban algorithmic stablecoins. Instead, it will qualify them as “unsecured crypto assets”, and not as “stablecoins”. However, promotions of such products will need to exclude the term “stable” from the marketing of algorithmic coins.
Will be considered a specific regulatory regime for crypto lending platforms and, according to the consultation paper, should ensure that lenders take into account adequate valuation of collateral and contingency plans in the event of the failure of the participants’ largest market counterparties.
Initial reactions to the consultation document have been positive. Binance did not hesitate to appreciate shared work. In discussion with Cointelegraph, Ripple’s EMEA policy director Andrew Whitworth has it called “a big step”:
“From today, the government should encourage further collaboration with the private sector to develop a comprehensive, risk-based framework that aligns with international best practices.”
Nick Taylor, head of public policy for EMEA at global crypto exchange Luno, believes this is a crucial moment for the sector. He commented:
“While there is still a long way to go before the new rules take effect, we are encouraged by the scale of the government’s ambition.”
The consultation closes on 30 April 2023. Until then, the UK government welcomes comments from all interested parties, including crypto companies, financial institutions, trade associations, representative bodies, academics, law firms and groups of consumers.
