Regulation
Britain to push forward cryptocurrency rules
LONDON, Oct 30 (Reuters) – Britain said on Monday it would pass legislation to implement its first set of rules to regulate the cryptocurrency sector, requiring market participants to be licensed before they can offer services to consumers.
Cryptocurrencies remain a small part of the global financial system, although the price of bitcoin has recovered after the cryptocurrency market crash FTX has raised concerns about links to traditional finance and harm to consumers. European Union has already begun implementing the world’s first comprehensive set of rules specifically for cryptocurrency markets in June, which is attracting cryptocurrency firms eager for regulatory certainty to set up base on the bloc. Britain’s finance ministry said it would proceed as proposed in a February public consultationwhich requires firms engaging in cryptocurrency activities to be authorised by the Financial Conduct Authority, although it has not given a start date. The rules, which draw lessons from the collapse of FTX, focus on cryptocurrencies, such as bitcoin, and the underlying distributed ledger technology (DLT) or blockchain that underpins the sector, and are seen as promising for uses such as securities regulation.
“The Government’s position is that businesses dealing directly with UK retail consumers should be required to obtain authorisation regardless of where they are located,” the department said.
The rules cover offering a cryptocurrency, operating a trading platform, exchanging cryptocurrencies for currencies such as sterling, arranging cryptocurrency investments and loans, and custody.
The ministry said the new rules would be framed within market law, rather than forming a stand-alone regime.
“It is unlikely that cryptocurrency regulation can be easily slotted into the existing regulatory framework,” said Jonathan Cavill, a lawyer at Pinsent Masons. “The reality is that as the market develops at a rapid pace, the UK risks being left behind if it fails to attract cryptocurrency businesses.”
IN LINE WITH THE EU
The department said Britain remains committed to creating a regulatory environment in which companies can innovate, while maintaining financial stability so that people can use new technologies reliably and safely.
It said it would accelerate overall implementation of the rules to provide clarity for the sector, with secondary legislation being tabled in parliament next year.
“At a high level, the Treasury’s approach is broadly in line with what we have seen in the EU,” said Sophia Le Vesconte, a fintech adviser at law firm Linklaters.
Cryptocurrency firms currently only have to meet anti-money laundering safeguards, although Britain introduced rules this month on cryptocurrency trading.
The UK announcement comes at a time of recovery for the cryptocurrency sector, after Bitcoin, the most widely held cryptocurrency, lost much of its value due to the FTX scandal and other scandals over the past year.
Last week bitcoin has increased at $38,872, its highest in nearly a year and a half, on growing speculation that an exchange-traded bitcoin fund is imminent in the United States. The ministry said it would also regulate stablecoinNew tab, opens a new taba digital currency backed by government-issued currencies for retail payments, and will introduce legislation in 2024 to give the FCA supervisory powers. The ministry also said it would set out regulations on how manage failureNew tab, opens a new tab of one of the major stablecoins.
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Reporting by Huw Jones; Editing by Andrew Cawthorne, Peter Graff and Louise Heavens
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