- Seeks to regulate issuance, custody, swapping and exchanges
- Law to be introduced by early 2024
- FCA could be appointed the prime watchdog
- Inline with plans to make U.K. a global crypto hub
The United Kingdom (U.K.) has finally pushed a final proposal for its stablecoin and crypto regulations. This comes after its lawmakers approved the Financial Services and Markets Act in June 2023.
The rules cover the following aspects of crypto:
- Offering cryptoassets
- Operations of Crypto Trading Platforms or Exchanges
- Swapping of Cryptoassets
- Safekeeping and Custody of Crypto Assets
In common terms, the law in its current form seeks to regulate cryptocurrencies, NFTs and fiat-backed stablecoins. Laws on other kinds of stablecoins might follow soon. Documents also show that fiat-backed stablecoins will now be governed by the 2001 Financial Services and Markets Tribunal Rules.
Interestingly, there is also a provision that in case crypto fails economically, there are methods to ensure its “safe failure” so that little to no spillover effects are seen on traditional finance.
Also, the government of the U.K. appears to have shown hesitancy to regulate decentralized finance.
It seems that a finalized bill might soon make it in the parliament as soon as early 2024. The bill might vest a large portion of regulatory power with the current financial regulator, the Financial Conduct Authority (FCA).
Treasury Minister Andrew Griffith made a statement that he was “very pleased to present these final proposals for cryptoasset regulation in the U.K.” And he also said that “the U.K. is the obvious choice for starting and scaling a cryptoasset business.”
What would Regulations mean for U.K. Crypto Companies?
For companies in the UK, this legislation would help regulate their finances as well as operations. Even companies that originate outside the U.K., regulations might provide a safe haven in U.K. for them.
Globally, crypto companies have not been able to raise much capital after the crash in the crypto markets in 2022.
Further, most companies are unable to invest in expanding their businesses to new geographies. Without a clear and defined laws, such companies would not be able to differentiate between legal and illegal.
There are also several situations where the activities of these companies fall in grey areas. Even crypto giants like Binance has faced much trouble in France, Netherlands, USA, and several other countries.
There has been several voices which are critical of the law in its current form. Lawmakers in the lower house of the Parliament argued that providing for the same regulations as fiat-based markets, would create a false sense of securities in the minds of the common people.
The crypto industry too has voiced its concerned on the delay which has occurred. Jonathan Cavill, lawyer at Pinsent Masons, said that it would be difficult to accomodate crypto in the current laws. Further, if U.K. also runs the risk of not attracting the crypto businesses.
Worldwide, crypto companies have been demanding regulations around Web3 which will help these companies raise capital, do expansion and invest in operations.
However, UK seems to be the only major economy which has provided some kind of regulation.
What are The Aims of the U.K.?
The United Kingdom aims to become a global hub of crypto, which was stated earlier(Dec 2022) by its current Prime Minister, then the Chancellor of the Exchequer (Finance Minister).
The country and its capital London are currently at the forefront of traditional finance. The hope of becoming an epicenter of decentralized finance might have stemmed from this aspect.
Drawing a few Conclusions
The statements and documents released by the U.K. are very vague at the current moment. It only delineated which activities are to be regulated. However, we expect that within the next couple of months, there would be enough regulatory clarity to gauge their impact.
Till then, it is best to assume that seeing the overall motivation of the U.K. government, it is sure that they would bring fair laws for crypto markets.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.