His Majesty’s Treasury published a long-anticipated consultation paper for the United Kingdom’s upcoming crypto regulation. The extensive 80-page document covers a broad range of topics, from the troubles of algorithmic stablecoins to nonfungible tokens (NFTs) and initial coin offerings (ICOs).
As stated by the Treasury, the proposals seek to place the U.K.’s financial services sector at the forefront of crypto and avoid hardline control measures that have gained momentum globally amid the crypto winter.
The Treasury announced that there won’t be a separate regulatory regime for crypto as it would fall under the framework of the U.K.’s Financial Services and Markets Act 2000 (FSMA). The goal is to level the playing field between crypto and traditional finances. However, Britain’s chief financial regulator, the Financial Conduct Authority (FCA), will tailor the existing FSMA’s rules for the digital assets market.
At least one nuisance from that decision is the obligation for crypto market participants to repeat the registration procedure. They have already had to undergo the process under the FCA licensing regime, but they will now need to be assessed “against a wider range of measures.”
The good news is that, apart from traditional finance, crypto companies won’t have to report their market data regularly. However, the exchanges would be required to keep that data and make it available at all times.
The Treasury deviated from some of its international counterparts and decided not to ban algorithmic stablecoins. It will instead qualify them as “unbacked crypto assets,” not as “stablecoins.” Nevertheless, the crypto promotions would have to exclude the term “stable” from marketing the algorithmic coins.
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The separate regulatory regime for crypto lending platforms would be considered and according to the consultation paper, should make lenders take into account an appropriate collateral valuation and the contingency plans for the failure of participants’ largest market counterparties.
The first reactions to the consultation paper were optimistic. Binance spared no time in welcoming the paper. Speaking to Cointelegraph, Ripple’s policy director EMEA, Andrew Whitworth, called it “a big step”:
“From today, the government should encourage further collaboration with the private sector to devise a comprehensive, risk-based framework, which aligns with international best practice.”
Nick Taylor, head of public policy for the EMEA at the global cryptocurrency exchange, Luno, considers this a pivotal moment for the industry. He commented:
“Whilst there is still a way to go before new rules come into force, we’re encouraged by the scale of the Government’s ambition.“
The consultation will close on April 30, 2023. Until then, the British government welcomes responses from all stakeholders, including crypto firms, financial institutions, trade associations, representative bodies, academics, legal firms and consumer groups.