The final regulations for the cryptocurrency ecosystem were released by the U.K. government, which stated that regulations will be implemented gradually and that early in 2019 legislation pertaining to fiat-backed stablecoins will be introduced.An update released on Monday states that as the government incorporates lending and trading into the purview of traditional financial regulation, other crypto domains, like algorithmic stablecoins, will follow.These regulations will place pertinent activities under the Financial Conduct Authority’s (FCA) jurisdiction.
The plans are expected to be well received by the industry, which has been complaining that the government has been slow to act. The plans are in line with an April 2022 policy set out by Rishi Sunak, the then-finance minister and current prime minister, to make the U.K. a hub for cryptoassets.
In a statement accompanying the document, Treasury Minister Andrew Griffith said he was “very pleased to present these final proposals for cryptoasset regulation in the U.K.” The finalized framework would mean “the U.K. is the obvious choice for starting and scaling a cryptoasset business.”
The government’s financial branch, the Treasury, released a crypto consultation in February, and it ended in April.The Financial Services and Markets Act 2023, which was approved by Parliament in June, allows cryptocurrencies to be regarded as regulated businesses.Although Griffith has now modified some of his proposals clarifying the treatment of cryptoassets it already considers traditional financial instruments as well as non-fungible tokens (NFTs), the government has already stated that it wants to bring crypto within the purview of traditional financial service regulation.
“The proposed regime does not intend to capture activities relating to cryptoassets which are specified investments that are already regulated,” such as traditional securities, the government document said, adding that unique NFTs that are akin to collectibles or artwork “should not be subject to financial services regulation.”
Future financial services regulations may, however, apply to NFTs used as exchange tokens, such as in situations where a large number are released simultaneously and their prices do not significantly vary.According to the document, the FCA will soon hold consultations on a framework for authorizing cryptocurrency companies.Additionally, the government intends to create equivalent measures for foreign companies:The government suggested that an overseas-regulated trading venue could apply to authorize its U.K. branch; the FCA will decide exactly what constitutes an authorized foreign trading venue.
Additionally, the government stated that it is not planning to outlaw decentralized finance (DeFi), citing the need to wait for that sector of the market to develop before regulating it.Additional government documents outline how stablecoins backed by fiat money will be issued and held in custody under the financial services regulations that were put in place in 2001. These regulations also include additional guidelines to guarantee that any digital payment system can fail safely and not bring down the financial system.In May, the central bank initially opened up consultations on a systemic stablecoin framework.
Plans from the government have not been without controversy.The Treasury Committee of the House of Commons has previously rejected calls to treat cryptocurrency like gambling, arguing that regulating platforms like bitcoin (BTC) and ether (ETH) along the lines of traditional financial services could mislead users into a false sense of security.
The FCA has received negative feedback and delays from the cryptocurrency industry, and some well-known companies have completely stopped offering services in the United Kingdom as a result of newly implemented regulations that limit cryptocurrency promotions.