The UK government continues to push ahead with plans to include cryptocurrency in mainstream financial services regulation, even though retail investors were hurt by the collapse of several prominent digital asset companies last year.
Late Tuesday, the Treasury announced that it will present a number of proposals to regulate a wide range of crypto assets activities in line with its traditional approach to traditional finance. It also stated that it would temporarily reverse its previous promise to align the regulation of crypto promotion with standards applicable to stocks, shares, and insurance products.
This move comes after a year of severe turbulence within the digital asset sector, including the collapse of Sam Bankman Fried’s FTX cryptocurrency empire, and lender Celsius. These events left people worldwide with billions in frozen funds. Last year, the value of the 500 largest crypto tokens fell $1.7tn.
According to Treasury insiders, the goal of the reforms are to make Britain’s crypto regulatory system more neutral after suggestions that it was too loose. One said that they wanted to be a global cryptocurrency hub. “But, we are changing the dial to reflect market events. No one is entitled to a free ride that could cause consumer harm.”
The Treasury has reduced its importance in Britain’s quest for growth after recent scandals in crypto. One Treasury official said that it was “relatively small”.
Tulip Siddiq (Labour’s shadow city minister) said that the UK’s main opposition party has been calling for a crackdown against the crypto wild west for several months. She said, “All that the Conservatives are promising us is more consultations — we need to take action immediately.”
On Tuesday, the Treasury also stated that it would strengthen regulations surrounding companies that facilitate cryptocurrency transactions and protect customer assets.
Cryptocurrency activity is currently not regulated by the UK’s Financial Conduct Authority; however, digital asset service providers that operate within the country’s borders must go through the watchdog’s anti-money-laundering review process.
Nearly 85% of the crypto groups trying to register with FCA have failed.
This has led to criticism from the industry about the UK’s inability to innovate.
The government also on Tuesday said it planned to open up a temporary exemption that would allow crypto companies registered on the anti-money-laundering list to promote their services to the public even while a broader regulatory regime for crypto activity is introduced.
Although the FCA doesn’t currently supervise financial promotions, the government promised last year that they would change the law to allow the FCA to oversee most cryptocurrency marketing.
The FCA stated that cryptoasset companies marketing to UK customers, as well as firms based abroad, should prepare now for the new regime.
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