Government finalises plans to impose regulations on crypto sector
Posted on 14 Dec 2022
The Treasury has confirmed that it is working on the final touches to a regulatory package that will introduce many rules to regulate the cryptocurrency industry.
Ministers are set to imminently launch a consultation on the new regulatory regime. Back in April, Rishi Sunak (in the role of chancellor at the time) said that ‘effective regulation’ would help the UK become a hub for cryptoasset technology on a global scale, and it would encourage the ‘businesses of tomorrow to invest, innovate and scale up on UK shores’.
This year the FCA has begun inspecting the money-laundering controls of all UK-based crypto companies. However, the FCA itself lacks the powers to protect consumers in certain areas of crypto exchange. These include (but are not limited to) false advertising, fraud, mis-selling and mismanagement. The new powers will allow the FCA to oversee these crypto transactions in a far broader way, such as monitoring how companies operate and advertise products which are available. In addition, members of the Treasury have said that there would be restrictions on selling into the UK market from abroad. They added that the proposed regulation would help to set out how the wind-down of crypto companies would be executed.
These powers will be included in the Financial Services and Markets Bill, which is still going through parliament. The bill was amended at the end of October to provide future regulations for cryptocurrencies. More generally, the bill encompasses the post-Brexit approach that the UK will take to financial regulation.
Andrew Griffith was quoted at an event in Edinburgh confirming that ‘there are questions about the future of crypto — but we’d be foolish to ignore the potential of the underlying technology’, insisting that the government’s plans remain unchanged in the wake of the FTX disaster. He said that the aim of the Financial Services and Markets Bill was to establish frameworks which would allow for firmer regulation of cryptoassets, and declared that the government would be ‘consulting on a world-leading regime for the rest of the cryptoasset market later this year’. This includes stablecoins, a type of cryptoasset whose value is linked to a traditional asset which is highly liquid, for example the UK pound or US dollar.
It has been hinted that a consultation on proposals for a border regulatory regime would begin in early 2023, because of ‘fast moving events’ in the crypto industry. FCA chief executive Nikhil Rathi last week said at the FT’s banking summit that despite not having powers yet, his agency was already being ‘proactive’ in various areas, one of which is publicly warning on ‘the risks of investing in crypto, the potential to lose all your money’. He also added that 85% of the companies which applied to join the FCA’s crypto register did not even pass their anti-money laundering tests.
Who it affects
These regulations will affect any and all companies selling in or into the UK.