The UK government has outlined its plans to regulate the digital assets market.
The proposals come in the wake of the collapse of crypto exchange FTX, an event which has accelerated international governments’ efforts to build a regulatory framework for digital assets.
The proposals centre around a number of cryptoasset activities, including exchanges, custody and lending. In essence, the government plans to bring into the current “regulatory perimeter” for mainstream financial services.
For each of these activities, the consultation paper sets out a series of processes which will be examined, including prudential requirements, data reporting, consumer protection, location policy and operational resilience.
The UK government has previously issued proposals focused on stablecoins and the financial promotion of cryptoassets. In April 2022, the then economic secretary John Glen set out what he described as “ambitious plans for the UK to become a global hub for cryptoasset technology”.
His replacement, Andrew Griffith said: “We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes cryptoasset technology.
“But we must also protect consumers who are embracing this new technology - ensuring robust, transparent, and fair standards.”
The UK is not alone in this ambition, and in the wake of the FTX collapse, regulation has become a central part of these plans.
Despite the apparent sense of urgency, it is not clear how long it will take for the proposals to be turned into concrete regulatory requirements.
The consultation period will end on April 30 this year, after which the government will look to introduce legislation. The Financial Conduct Authority will then consult on more detailed rules for the sector.
The potentially extended timetable has been criticised by opposition parties.
Tulip Siddiq, the Labour party’s shadow City minister, said: “Labour has been calling for a crackdown on the crypto wild-west for months. All the Conservatives are promising is further consultations — we need action now.”
The issue of regulation for crypto security will be discussed in depth during a FundsTech webinar scheduled for February 9. More details can be found here.
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