The UK government will set out ambitious plans to robustly regulate cryptoasset activities – providing confidence and clarity to consumers and businesses alike.Consultation proposals include strengthening rules for crypto trading platforms and a robust world-first regime for crypto lending
Announcement delivers on financial services roadmap by embracing technological change and innovation, delivering on the Prime Minister’s plan to grow the economy. Ambitious plans to protect consumers and grow the economy by robustly regulating cryptoasset activities have been announced by the government.
Cryptoassets – commonly known as ‘crypto’ – are a relatively new, diverse and constantly evolving class of assets that have a range of potential benefits, as well as posing risks to the consumer. As is common in emerging technology markets, the crypto sector continues to experience high levels of volatility and a number of recent failures have exposed the structural vulnerability of some business models in the sector.
Our robust approach to regulation mitigates the most significant risks, while harnessing the advantages of crypto technologies. This enables a new and exciting sector to safely flourish and grow, boosting jobs and investment.
The regulatory proposals follow last week’s announcement by the U.K.’s Financial Conduct Authority (FCA) that most entities that want to do business with crypto assets in Great Britain, 85% of all applicants, have failed to convince regulators they can meet the country’s minimum anti-money laundering (AML) requirements.
The regulator said it had identified significant failures in spheres such as due diligence, risk assessment, and transaction monitoring. “In many cases, key personnel lacked appropriate knowledge, skills and experience to carry out allocated roles and control risks effectively,” the FCA said.
Meanwhile, the Treasury Committee at the House of Commons is still looking into the potential threats and opportunities associated with crypto assets and the need for regulation. “We are in the middle of an inquiry into crypto regulation and these statistics have not disabused us of the impression that parts of this industry are a ‘Wild West,’” Harriett Baldwin, chair of the select committee, was quoted as stating.
The proposals will also strengthen the rules around financial intermediaries and custodians – which have responsibility for facilitating transactions and safely storing customer assets. These steps will help to deliver a robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms. As part of this approach, the consultation will seek views on improving market integrity and consumer protection by setting out a proposed crypto market abuse regime.
In addition, to address industry concerns about the small number of Financial Conduct Authority (FCA) authorised cryptoasset firms who can issue their own promotions, HM Treasury is also introducing a time limited exemption. Cryptoasset businesses that are registered with the FCA for anti-money laundering purposes will be allowed to issue their own promotions, while the broader cryptoasset regulatory regime is being introduced.
This approach delivers on the original policy intention of the measure to promote innovation, enhance consumer protection and ensure that cryptoasset promotions can be held to equivalent standards as promotions of financial services products with similar risk profiles.