Responding to the cryptocurrency industry, which has long been concerned about delays, the UK government is finally revealing its plans for regulating the sector. The goal is to make the country a preferred destination for the industry’s growth, and thus attract capital.
UK sets its sights on cryptocurrencies
According to the government’s announcement, final regulation of cryptocurrencies will be phased in gradually, with regulations for stablecoins based on fiat currencies coming into effect early in the coming year. Plans also include areas such as algorithmic stablecoins, which will also be covered by conventional financial regulations.
Referring to a policy set by Prime Minister Rishi Sunak in April 2022, the government hopes the moves will make the UK a central place for crypto assets. The industry, which has complained about a lack of regulatory clarity and delays in implementing proper legal rules, should welcome the plans.
Treasury Minister Andrew Griffith has expressed enthusiasm about the presentation of the final proposals for regulating cryptocurrencies in the country. According to him, the established framework will make the UK a natural choice for the development of cryptocurrency activities.
NFTs covered by separate rules
The Treasury recently published the results of a consultation, based on which Parliament passed a bill in June allowing cryptocurrencies to be treated as regulated financial activities. Now the government is specifying that virtual assets will be included in conventional financial regulation.
Meanwhile, it has clarified that the proposed framework will not cover cryptocurrencies that are already covered by existing regulations, such as traditional securities. Non-tradable tokens (NFTs) will also be considered on a case-by-case basis, as they are more similar to collector’s items or works of art due to their characteristics.
The government’s plans do not include a ban on decentralized finance (DeFi), recognizing that it is too early to regulate this aspect of the industry.
Cryptocurrencies are not gambling, but a real good
The introduction of stablecoin regulations based on fiat currencies will be composed with existing 2001 financial services regulations, with additional safeguards to ensure the stability of digital payment systems.
However, the government’s plans have been met with criticism. Lawmakers on the House of Commons Treasury Committee have previously argued that regulating cryptocurrencies under conventional financial services rules could lead to a false sense of security. Significantly, however, the government has rejected calls to treat cryptocurrencies as a form of gambling.
Meanwhile, the cryptocurrency industry has expressed frustration over delays and poor communication from the FCA. This attitude seems justified, as new rules restricting cryptocurrency promotions have prompted some well-known companies to suspend operations in the UK altogether.