Regulation

The future financial services regulatory regime for cryptoassets in the UK | Global law firm

Published

6 months ago

9 June, 2024

The future financial services regulatory regime for cryptoassets in the UK | Global law firm

HMT Original Proposals HMT Final Proposals Regulatory approach
HM Treasury proposed to regulate cryptoasset-related activities within the existing UK regulatory framework, rather than creating an entirely standalone regime. This would be done via amendments to the Financial Services and Markets Act 2000 (FSMA), the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005, and the FCA Handbook. Some provisions may also be introduced through the new Designated Activities Regime (DAR).

In general, HM Treasury plans to proceed as proposed. This will include expanding the list of “specified investments” in the RAO to require firms that undertake relevant activities involving cryptoassets by way of business to be FCA authorised. The RAO definition of “financial instruments” will not be expanded to include currently unregulated cryptoassets.

HM Treasury has also confirmed that it considers the DAR a ‘strong, flexible tool’ that is likely to form part of the future financial services regulatory regime for cryptoassets. It has firmly rebutted the suggestion of banning cryptoassets or regulating them as a form of gambling.

Scope
HM Treasury said it would focus on the regulation of certain activities performed in relation to a broad array of cryptoassets. It proposed a broad definition of “cryptoasset” to capture all current types of cryptoasset and ensure the Government also has the power to regulate other types of cryptoasset that may exist in the future. While confirming the adoption of a broad definition of cryptoassets, following feedback the HMT Final Proposals seek to reassure industry on some specific examples (although HM Treasury notes that the precise legal mechanism for distinguishing between in- and out-of-scope tokens will be set out in relevant secondary legislation and FCA rules).

Cryptoassets that are not used for one of the listed regulated activities (set out in Table 4A of the HMT Original Proposals) within financial services markets or used as a financial services instrument, product or investment are not intended to be in scope of the proposed regime (although they may be subject to other regulatory regimes). Cryptoassets which are specified investments that are already regulated are also not intended to be captured.

NFTs
The HMT Original Proposals suggested that certain activities performed in relation to non-fungible tokens (NFTs) may be in scope and therefore require authorisation, so there would be no blanket exemption for NFTs. Following feedback that the proposed treatment of NFTs and utility tokens should be clarified, and subject to the previous row, the HMT Final Proposals explain that activities relating to “truly unique or non-fungible” NFTs that are more akin to digital collectibles or artwork than financial services (in the general sense) or products should not be subject to financial services regulation. The focus in deciding whether an NFT falls in scope of the regime will be on what the token is used for rather than how it describes itself. Issuance of cryptoassets

Under the HMT Original Proposals, the mere issuance of a cryptoasset would not in itself be a regulated activity, save where that cryptoasset is a fiat-backed stablecoin. However, the admittance of a cryptoasset to trading on a cryptoasset trading venue would be regulated and public offers of cryptoassets that are not security tokens would also be a designated activity.

The HMT Original Proposals set out proposed requirements in relation to preparation of disclosure / admission documentation, liability requirements, and general marketing requirements. These proposals seek to align with the UK’s proposed Public Offers and Admissions to Trading Regime.

Where there is no issuer of a particular cryptoasset – such as Bitcoin – it will be the responsibility of a cryptoasset trading venue to take on the responsibilities of an issuer if it wishes to admit that asset to trading on its venue.

HM Treasury plans to proceed with its position as consulted on. The Government’s view is there should be disclosure documents in place for all cryptoassets (including those with no issuer) which are made available for trading on a UK cryptoasset trading venue.

Trading venues will still be required to define detailed content requirements for admission disclosure documents, but the Government acknowledges industry’s appetite for prescriptive content requirements and supports the idea of a central coordinating body.

In terms of liability, it will use the necessary information test and notes that the proposed recklessness liability standard for certain forward-looking statements, and negligence liability standard for historical, factual statements, will enable market participants to manage their liability provided they make reasonable enquiries.
HM Treasury also confirms its support for the use of publicly available information to compile appropriate parts of the disclosure and admission documents, as long as those preparing the documents are clear on where the information originated from and the level of due diligence they have done on it.

Issuance of stablecoins
The HMT Original Proposals did not specifically address the issuance of stablecoins, as measures to address those asset classes had already been consulted on by HM Treasury and changes were being made via FSMA 2023 (which at the time had not yet been passed) to reflect the intended regulatory outcomes for persons issuing and providing various activities in relation to fiat-backed stablecoins. HM Treasury has confirmed it plans to create a regulated activity under the RAO for the issuance of fiat-backed stablecoins in or from the UK, which will apply to all issuers of fiat-backed stablecoins located within the UK.

FCA rules will specify the requirements for backing assets for fiat-backed stablecoins issued under this activity, as well as holding them under a statutory trust and the requirements for redemption rights and capital requirements (amongst other things). If the stablecoins were to be recognised by HM Treasury, BoE’s proposed rules (which have some important differences) would apply.

HM Treasury noted that the regulators would consult on these rules before they come into force, and they began this process on 6 November 2023 with the publication of their discussion papers. In DP23/4, the FCA sets out its proposed approach to regulation around issuing and holding stablecoins, which (under the HMT Final Proposals) will include authorisation requirements for firms wishing to issue fiat-backed stablecoins in or from the UK, or to carry out custody activities in relation to stablecoins from the UK or to UK based consumers.

Monitoring and restrictions on the use of stablecoins
As for issuance, monitoring and restrictions on the use of stablecoins were not specifically addressed in the HMT Original Proposals. HM Treasury intends to regulate the use of fiat-backed stablecoins in payment chains for both mixed stablecoin payments (where there is a conversion from stablecoin to fiat, or vice versa, within the payment chain) and for pure stablecoin payments. This will be done through amendments to the Payment Services Regulations 2017 (PSRs). More detail on HM Treasury’s suggested approach to regulation in this area is set out in the stablecoin policy paper.

The FCA’s and BoE’s November discussion papers cover their proposals to implement the regulation of stablecoins for use in payments in the UK. Under the HMT Final Proposals, the FCA will regulate the use of stablecoins as a means of payment under the PSRs using two possible models (the ‘hybrid model’ and the ‘pure stablecoin model’), while the BoE will regulate operators of systemic payment systems using stablecoins, service providers that provide essential services to those systems and service providers that are systemic in their own right.

Territorial scope
The regime to be established under the HMT Original Proposals would capture cryptoasset-regulated activities that are provided in or to the UK. This would, therefore, capture overseas firms servicing UK-based customers, unless such firms are able to benefit from a relevant exemption. The territorial nature of the regime remains as consulted on, but there is confirmation that the Overseas Persons Exclusion will not apply to cryptoassets business, which is a marked departure from traditional financial services regulation. Location requirement for cryptoasset service providers
In the HMT Original Proposals, whether or not providers are required to have a physical presence in the UK in order to become authorised to carry out cryptoasset services remained under consideration. It was expected that the FCA would apply its existing approach to international firms when determining whether a firm is mandated to be located in the UK as part of any authorisation.

The HMT Original Proposals clearly anticipated that operators of cryptoasset trading venues would need to establish a UK-based entity if they wished to be authorised under the regime.

The HMT Final Proposals confirm that firms dealing directly with UK retail consumers should be required to be authorised irrespective of where they are located.

HM Treasury suggests that UK firms that operate a regulated crypto trading venue in an overseas jurisdiction could be permitted to apply for authorisation for a UK branch extension of their overseas entity. However, the FCA would determine the specifics of requirements on location in line with existing practice in the UK.

Provision of intermediary services in cryptoassets
The HMT Original Proposals envisaged that persons performing a range of intermediary activities in relation to cryptoassets could be required to seek authorisation with the FCA. This would capture firms engaged in dealing as principal, dealing as agent, arranging (bringing about) deals in investments or making arrangements with a view to transactions in cryptoassets.

HM Treasury proposed segmented requirements for firms performing cryptoasset-related regulated activities, so rather than one chapter of provisions relating to cryptoasset service providers in general, separate provisions would apply to trading venues, intermediaries, lending platforms and custodians.

Cryptoasset intermediaries would need to comply with a range of ongoing requirements once authorised, including best execution, conflicts, appropriateness, data reporting, capital requirements, outsourcing and operational resilience standards, and governance requirements.

HM Treasury has confirmed that it plans, in general, to take forward its proposed approach. It will define a set of new regulated activities relating to the intermediation of cryptoassets, drawing from analogous activities in the existing regulatory perimeter.

The legislative approach and subsequent rules set by the FCA will be designed with careful consideration of specific aspects of crypto markets and implications for concepts which may not map across well from the traditional financial services sector.

Trading venues for cryptoassets
Under the HMT Original Proposals, in addition to compliance with general requirements applicable to providers of services in cryptoassets, operators of trading platforms in cryptoassets would have to maintain clear and transparent operating rules for the trading platform. They would also have to have in place appropriate systems, procedures and arrangements to ensure their platform’s resiliency, orderly functioning and protection against market abuse and money laundering / terrorist financing. Before admitting a cryptoasset to trading, they would have to ensure that it complies with the trading platform’s operating rules and assess its suitability.

Operators of cryptoasset trading platforms would be prohibited from dealing on own account on their platform. They would, however, be able to engage in matched principal trading, subject to client consent. Transparency requirements, akin to those applicable to securities trading venues would also be applicable.

The HMT Final Proposals confirm HM Treasury’s intention to proceed with the proposed approach but reiterate that specific characteristics and risks of crypto trading activities must be taken into consideration.

Having understood that there are numerous business models and execution protocols, HM Treasury reports that the Government does not intend to explicitly endorse or prohibit specific ones.

Firms intending to operate a cryptoasset trading venue will be required to obtain FCA authorisation for that activity, and will provide a crucial function in terms of admitting cryptoassets to their venue and conducting due diligence over them.

Crypto-lending platforms The HMT Original Proposals set out a new regulated activity of operating a cryptoasset lending platform. Operators of such platforms would need to be authorised and to comply with a range of ongoing obligations, including disclosure requirements, capital and prudential standards and clear legal terms describing ownership of lent and borrowed assets. The HMT Final Proposals confirm HM Treasury’s intention to take forward the approach outlined in the consultation, in line with broad support from industry and consumer groups.

As there are various types of cryptoasset borrowing and lending arrangements, involving different business models, market participants and risks, HM Treasury notes that it would not make sense to regulate all borrowing and lending activities in the same way or adopt a single model of traditional lending regulation for all crypto lending arrangements. There will therefore, for example, be a clear differentiation between lending to retail consumers and lending between wholesale counterparties, with centralised lending platforms to retail consumers being prioritised for regulation and likely to be subject to additional requirements.

Custody of cryptoassets
The HMT Original Proposals stated that persons safeguarding and administering cryptoassets and / or means of access to a cryptoasset (i.e. private keys) would need to seek authorisation under the regime. The FCA would also be tasked with using the existing bones of its Client Assets Sourcebook to create a bespoke regime for cryptoassets, which would cover books and records requirements, safeguarding arrangements, controls and governance requirements and organisational requirements. HM Treasury plans to take forward the proposed approach and will pass legislation defining a new regulated activity for custody covering (i) safeguarding, (ii) safeguarding and administration, or (iii) the arranging of safeguarding or safeguarding and administration, of a cryptoasset. The regime will be based on existing frameworks for traditional finance custodians but with suitable modifications to accommodate unique cryptoasset features and putting in place new provisions where appropriate.

In DP23/4, the FCA sets out its proposed approach to setting the standards that should apply to custody of regulated cryptoassets (or the means of accessing them, such as private keys). While this covers custody of regulated stablecoins and security tokens, the FCA notes that, subject to feedback, it is likely to apply a similar approach to custody of other cryptoassets that come into regulation in the future.

Passporting rights / equivalence
As a domestic regime, the HMT Original Proposals did not include any passporting rights for persons authorised to provide cryptoasset-related regulated activities.

However, HMT stated its intention to seek to establish equivalence arrangements for overseas firms subject to comparable obligations.

In the HMT Final Proposals, HM Treasury acknowledges the benefit of working towards deference or equivalence type arrangements and notes that it is committed to cooperating with international partners to deliver a framework that can accommodate this. In the meantime, it is recognised that an approach to facilitate access to global liquidity pools will be needed, even if this is time limited, until such arrangements are in place.

FCA DP23/4 also discusses the potential for overseas stablecoins to be used for payment in the UK (as proposed by HM Treasury), provided they meet equivalent standards. HM Treasury is exploring the possibility of creating a new activity of acting as a ‘payment arranger’ to assess and approve overseas stablecoins for this purpose.

M&A rules for stablecoin issuers and cryptoasset service providers
Under the HMT Original Proposals, firms authorised to perform cryptoasset-related regulated activities would be authorised persons and so would fall within scope of the FCA’s change in control regime. This means persons acquiring control in such firms would need to seek prior approval from the FCA. The position remains the same under the HMT Final Proposals and is confirmed by the FCA in DP23/4 in relation to stablecoins. Market abuse
The intention under the HMT Original Proposals was to expand the existing scope of the UK’s market abuse regime to address cryptoassets that have been admitted or requested to be admitted to trading on a UK cryptoasset trading venue. The regime would apply to all persons, regardless of where they are based, and would create civil offences covering insider dealing, market manipulation and unlawful disclosure of inside information. A core feature of the regime would be the imposition of requirements on the operators of cryptoasset trading venues, with such operators required to develop systems and controls and procedures to identify and investigate suspected market abuse. HM Treasury confirms its intention to proceed with most aspects of the approach consulted on, including regime scope, regulatory trigger points and use of the existing UK market abuse regime. It sets out a modified approach towards market abuse obligations on cryptoasset exchanges, acknowledging the potential need for a staggered implementation for cross-venue data sharing obligations, although this would be time-limited. HM Treasury also supports in principle the idea of having a centralised, industry-led body (with FCA oversight) to coordinate the information sharing effort.

The Government agrees that additional guidance should be made available by the regulator to provide clarity on what constitutes market abusive behaviour (including a non-exhaustive list of examples). The Government also agrees that key aspects of the regime will need to be periodically reviewed and assessed given the dynamic nature of the industry.

AML / CFT and existing cryptoasset service provider regimes
The HMT Original Proposals provided that, once the amended regime is in force and applicable, the UK’s existing cryptoasset service provider registration regime under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) would cease to apply. Instead, firms undertaking regulated cryptoasset activities would be expected to adhere to the same financial crime standards and rules that apply to similar traditional financial services activities. These are broader than those contained in the MLRs and cover anti-bribery and corruption, sanctions, fraud and other aspects of financial crime. HM Treasury intends to proceed with the proposed approach. It reiterates that there will be no automatic authorisation under FSMA for cryptoasset service providers currently registered with the FCA under the MLRs. However, there is a lack of clarity as to whether there will be a transitional authorisation regime for existing providers – which was a key ask of the industry (see further below).

In DP23/4, the FCA notes that for the proposed regime for regulated stablecoins, it is exploring how the existing financial crime framework in FSMA and the MLRs can be applied, as well as any potential amendments to the Handbook that may be needed, in line with the approach of same risk, same regulatory outcome. The FCA says it considers it proportionate for regulated stablecoins issuers and custodians to be subject to the same financial crime rules and operate in the same way all FSMA authorised firms are expected to act.

Timeline
The deadline for responses to the HMT Original Proposals was 30 April 2023. Phase 1 (covering fiat-backed stablecoins) of HM Treasury’s approach to regulating cryptoassets has already begun to be implemented through the introduction of measures in FSMA 2023. HM Treasury plans to bring forward secondary legislation by early 2024 (subject to Parliamentary time) and, as discussed above, the regulators have started to seek feedback on their proposals for implementation.

There is a suggestion that secondary legislation to effect phase 2 (covering a wider range of cryptoassets and activities) of the regime will be laid in 2024, subject to Parliamentary time – a key caveat given the forthcoming General Election. The FCA will then need to design various aspects and consult on changes to its rules to operationalise the new regime.

Transitional arrangements
The HMT Original Proposals did not envisage any transitional arrangements, whereby firms registered as cryptoasset exchange providers and / or custodian wallet providers would be afforded more time or a different route to apply for full authorisation under FSMA. As above, the HMT Final Proposals confirm that crypto firms already registered with the FCA under the MLRs will need to seek authorisation from the FCA under the new FSMA-based regime. However, the FCA will consider the regulatory histories of all applicant firms when assessing authorisation applications.

HM Treasury acknowledges the need for sufficient transitional disclosure arrangements for well-established tokens such as Bitcoin, in order to reduce the risks and impacts of “cliff edges” and avoidable removals from trading in relation to the back book of tokens already in circulation. However, no other transitional arrangements are being proposed at this stage.

Grandfathering arrangements
There were also no grandfathering arrangements established under the HMT Original Proposals. HMT stated clearly that firms already authorised under FSMA would need to apply to the FCA to vary their permissions to address the performance of any cryptoasset-related regulated activities. Firms registered as cryptoasset service providers under the MLRs would need to apply to the FCA afresh under the amended regime. The position remains the same under the HMT Final Proposals.

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Regulation

Cryptocurrency Regulation in Slovenia 2024

Published

4 months ago

1 August, 2024

Chain Feed Staff

Cryptocurrency Regulation in Slovenia 2024

Slovenia, a small but highly developed European country with a population of 2.1 million, boasts a rich industrial history that has contributed significantly to its robust economy. As the most economically developed Slavic nation, Slovenia has grown steadily since adopting the euro in 2007. Its openness to innovation has been a key factor in its success in the industrial sector, making it a favorite destination for cryptocurrency enthusiasts. Many believe that Slovenia is poised to become a powerful fintech hub in Europe. But does its current cryptocurrency regulatory framework support such aspirations?

Let’s explore Slovenia’s cryptocurrency regulations and see if they can push the country to the forefront of the cryptocurrency scene. My expectations are positive. What are yours? Before we answer, let’s dig deeper.

1. Cryptocurrency Regulation in Slovenia: An Overview

Slovenia is known for its pro-innovation stance, providing a supportive environment for emerging technologies such as blockchain and cryptocurrencies. Under the Payment Services and Systems Act, cryptocurrencies are classified as virtual assets rather than financial or monetary instruments.

Regulation of the cryptocurrency sector in Slovenia is decentralized. Different authorities manage different aspects of the ecosystem. For example, the Bank of Slovenia and the Securities Market Agency supervise cryptocurrency transactions to ensure compliance with financial laws, including anti-money laundering (AML) and counter-terrorist financing regulations. The Slovenian Act on the Prevention of Money Laundering and Terrorist Financing (ZPPDFT-2) incorporates the EU’s Fifth Anti-Money Laundering Directive (5MLD) and aligns with the latest FATF recommendations. All virtual currency service providers must register with the Office of the Republic of Slovenia.

2. Cryptocurrency regulation in Slovenia: what’s new?

This year, there have been several noteworthy developments in the cryptocurrency sector in Slovenia:

July 25, 2024: Slovenia has issued a €30 million on-chain sovereign digital bond, the first of its kind in the EU, with a yield of 3.65%, maturing on 25 November 2024.

May 14, 2024: NiceHash has announced the first Slovenian Bitcoin-focused conference, NiceHashX, scheduled for November 8-9 in Maribor.

3. Explanation of the legal framework for cryptocurrency taxation in Slovenia

Slovenia’s cryptocurrency tax framework provides clear guidelines for both individuals and businesses. According to the Slovenian Tax Administration, tax treatment depends on the status of the trader and the nature of the transaction.

Individuals: Income earned from cryptocurrencies through employment or ongoing business activities is subject to personal income tax. However, capital gains from trading or market fluctuations are exempt from taxation.
Society: Capital gains from cryptocurrency activities are subject to a corporate income tax of 19%. Value added tax (VAT) generally applies at a rate of 22%, although cryptocurrency transactions considered as means of payment are exempt from VAT. Companies are not allowed to limit payment methods to cryptocurrencies only. Tokens issued during ICOs must comply with standard accounting rules and the Corporate Tax Act.

4. Cryptocurrency Mining in Slovenia: What You Should Know

Cryptocurrency mining is not restricted in Slovenia, but the income from mining is considered business income and is therefore taxable. This includes rewards from validating transactions and any additional income from mining operations. Both natural persons and legal entities must comply with Slovenian tax regulations.

5. Timeline of the evolution of cryptocurrency regulations in Slovenia

Here is a timeline highlighting the evolution of cryptocurrency regulations in Slovenia:

2013:The Slovenian Tax Administration has issued guidelines according to which income from cryptocurrency transactions should be taxed.
2017:The Slovenian Tax Administration has provided more detailed guidelines on cryptocurrency taxation, based on factors such as the trader’s status and the type of transaction.
2023The EU has adopted the Markets in Cryptocurrencies Regulation (MiCA), which establishes a uniform regulatory framework for cryptocurrencies, their issuers and service providers across the EU.

Final note

Slovenia’s approach to the cryptocurrency industry is commendable, reflecting its optimistic view of the future of cryptocurrency. The country’s balanced regulatory framework supports cryptocurrency innovation while protecting user rights and preventing illegal activities. Recent developments demonstrate Slovenia’s commitment to continuously improving its regulatory environment. Slovenia’s cryptocurrency regulatory framework sets a positive example for other nations navigating the evolving cryptocurrency landscape.

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Regulation

A Blank Slate for Cryptocurrencies: Kamala Harris’ Regulatory Opportunity

Published

4 months ago

1 August, 2024

Chain Feed Staff

A Blank Slate for Cryptocurrencies: Kamala Harris' Regulatory Opportunity

Photo by The Dhage of Shubham ON Disinfect

As the cryptocurrency landscape continues to evolve, the need for clear regulation has never been greater.

Vice President Kamala Harris is now leading the charge on digital asset regulation in the United States, presenting a unique opportunity for a clean slate. This fresh start can foster innovation and protect consumers. It can also pave the way for widespread adoption across industries, including real estate agencies, healthcare providers, and online gambling platforms like these online casinos in the uk. According to experts at SafestCasinoSites, these platforms have advantages such as bonus offers, a wide selection of games, and various payment methods. Ultimately, all this increased adoption could push the cryptocurrency market forward.

With that in mind, let’s take a look at the current state of cryptocurrency regulation in the United States, which is a complex and confusing landscape. Multiple agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN), have overlapping jurisdictions, creating a fragmented regulatory environment. This lack of clarity has hindered innovation, as companies are reluctant to invest in the United States, fearing regulatory repercussions. A cohesive and clear regulatory framework is urgently needed to unlock the full potential of cryptocurrencies in the United States.

While the US struggles to find its footing, other countries, such as Singapore and the UK, are actively embracing the cryptocurrency industry with clear and supportive regulatory frameworks. This has led to a brain drain, with companies opting to set up in more hospitable environments.

Vice President Kamala Harris has a unique opportunity to change this narrative and clean up the future. cryptocurrency regulation. By taking a comprehensive and inclusive approach, it can help create a framework that balances consumer protection with innovation and growth. The time has come for clear and effective regulation of cryptocurrencies in the United States.

Effective regulation of digital assets is essential to fostering a safe and innovative environment. Key principles guiding this regulation include clarity, innovation, global cooperation, consumer protection, and flexibility. Clear definitions and guidelines eliminate ambiguity, while encouraging experimentation and development to ensure progress. Collaboration with international partners establishes consistent standards, preventing regulatory arbitrage. Strong safeguards protect consumers from fraud and market abuse, and adaptability allows for evolution in response to emerging trends and technologies, striking a balance between innovation and protection.

The benefits of effective cryptocurrency regulation are many and far-reaching. By establishing clear guidelines, governments can attract investors and traditional users, spurring growth and adoption. This, in turn, can position countries like the United States as global leaders in financial technology and innovation. Strong protections will also increase consumer confidence in digital assets and related products, boosting economic activity.

A thriving cryptocurrency industry can significantly contribute to GDP and job creation, which has a positive impact on the overall economy. Furthermore, effective regulation has paved the way for the growth of many companies such as tech startups, online casinos, and pharmaceutical companies, proving that clear guidelines can unlock new opportunities without stifling innovation. This is a great example of how regulation can alleviate fears of regressive policies, even if Kamala Harris does not repeal the current progressive approach. By adopting effective regulation, governments can create fertile ground for the cryptocurrency industry to thrive, driving progress and prosperity.

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Regulation

Think You Own Your Crypto? New UK Law Would Ensure It – DL News

Published

4 months ago

1 August, 2024

Chain Feed Staff

Think You Own Your Crypto? New UK Law Would Ensure It – DL News

The UK Law Commission has developed a bill that will address a situation of legal uncertainty.
The commission’s goal is to ensure that cryptocurrencies are legally treated as personal property.

UK law is not entirely clear whether cryptocurrencies can be considered personal property.

This is according to the UK Law Commission, which argues that while most investors assume that when they buy cryptocurrencies, they are “acquiring property rights in the same way as buying, say, a watch or a laptop.”

“As the law currently stands, this is not necessarily the case,” the respected legal body said in a new report on Tuesday.

The report was accompanied by a solution: a new bill to consolidate the legal status of digital assets as personal property.

This could be huge for the estimated 4.7 million Britons valued hold cryptocurrencies.

“This will allow the courts to determine a range of issues,” the report says.

If passed, the law would help clarify how cryptocurrencies are treated in cases of bankruptcy, estate planning or theft.

Flexible law

The commission is an independent body responsible for reviewing UK law. It began investigating whether English and Welsh property laws apply to digital assets in 2020.

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At the time, then-Chancellor of the Exchequer Rishi Sunak expressed ambitions to transform the UK into a cryptocurrency hub as Britons invested more.

In 2023, the commission decided that, in most cases, the legislation of England and Wales is sufficiently flexible to regulate cryptocurrencies.

This means that any asset, from Bitcoin to non-fungible tokens and some types of digital contracts, can be considered personal property, without Parliament having to write extensive new laws.

There was one small area of uncertainty, however: it was unclear whether cryptocurrencies fell within the two categories of personal property recognised under UK law.

These two categories are made up of tangible assets (cars, laptops, bags) and intangible assets (contracts, stocks, and debt).

The bill that will now go to Parliament to be converted into law aims to remedy this situation.

Without that clarification, courts may try to lump cryptocurrencies together with intangible assets, said Adam Sanitt, head of litigation, knowledge, innovation and corporate support EMEA at law firm Norton Rose Fulbright. DL News in March.

This is problematic because intangible assets are creations of the legal system, while cryptocurrencies are not.

“How the law treats digital assets, what rights you have over them, how you own them, how you transfer them to other people—that treatment is different, because digital assets don’t exist by virtue of the legal system, but independently of it,” Sanitt said.

The money in your bank account, for example, is a legal creation. The government could pass a law to cancel it.

However, if the UK passed a law banning Bitcoin, Bitcoin would not cease to exist.

Sanitt said: “That’s why digital assets are so important: neither the government nor the legal system can take them away from you.”

Contact the author at joanna@dlnews.com.

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Regulation

The Solution the Cryptocurrency Industry Needs

Published

4 months ago

1 August, 2024

Chain Feed Staff

The Solution the Cryptocurrency Industry Needs

The cryptocurrency industry has performed remarkably well since its inception, but now faces a critical hurdle that requires careful consideration and regulatory expertise to overcome. Despite the industry’s rapid growth and rate of global adoption, the gap between the industry and global regulation is only widening as new innovations break through into the public domain.

Although efforts are being made on both sides, regulators’ lack of familiarity with cryptocurrencies and the industry’s lack of regulatory expertise are hindering innovation in the sector. To address this issue, traditional financial institutions (TradFi) such as MultiBank Group have started venturing into the cryptocurrency sector.

The regulatory gap

Over the past decade, the cryptocurrency industry has grown dramatically as tech entrepreneurs and forward-thinking thinkers have founded a plethora of crypto platforms and protocols to push the boundaries of the space. The problem faced by these newcomers, who are often unfamiliar with the hurdles posed by financial regulators, can quickly overwhelm and stall operations.

On the other hand, regulators more attuned to TradFi systems may be equally stifled by the complexities of decentralization and blockchain technology. The unfamiliarity experienced by both innovators and regulators creates a stark regulatory divide between both sides, leading to misunderstandings and potential conflicts.

To overcome this lack of communication, a bridge must be built to bridge the gap, ensuring future stability for the cryptocurrency industry and clearer legislation from regulators.

Efforts to bridge the gap between industry

The gap between the cryptocurrency industry and regulators is slowly narrowing as efforts to regulate cryptocurrencies and Web3 space activities are gaining momentum. Specific regulatory actions are taking place in many countries, aimed at providing greater oversight of cryptocurrency transactions, cryptocurrency exchanges, and initial coin offerings (ICOs).

Despite being a positive step in the right direction, these new regulations can differ significantly between jurisdictions around the world. This fragmentation results in a regulatory environment filled with obstacles, bottlenecks, and varying requirements and prohibitions. As cryptocurrency companies and TradFi institutions attempt to navigate the minefield, the regulatory maze becomes increasingly convoluted.

TradFi institutions like MultiBank Group are working to solve this problem, as one of the largest financial derivatives institutions in the world with over 12 licenses across all continents. Founded in 2005, the Group has an impeccable and trustworthy reputation globally, extensive expertise in financial regulation and has now ventured into the cryptocurrency space via MultiBank.io.

MultiBank.io: TradFi Excellence in the Crypto Space

Expanding into the cryptocurrency space via MultiBank.io has enabled MultiBank Group to provide regulatory clarity and trust to the digital asset industry. With a substantial daily trading volume of $12.1 billion, the timely decision to enter the cryptocurrency space has the potential to set regulatory precedents and standards for years to come.

By helping to develop sensible and well-considered regulations, MultiBank.io’s established reputation allows the company to communicate effectively and clearly with regulators. Unlike others in the industry without regulatory expertise, MultiBank.io facilitates the Group’s commitment to rigorous regulatory standards, the scope of oversight and establishes the necessary transparency.

The company’s approach ensures that regulatory licenses are pre-acquired, compliance is met globally without jurisdictional barriers, and transactions remain secure at all times. By helping to create robust regulations that are both clear and innovation-friendly, MultiBank Group looks forward to standardizing the entire cryptocurrency industry for other potential innovators.

One of the biggest challenges in establishing a clearly constructed bridge between regulators and the cryptocurrency industry is effective communication. By leveraging its institutional background TradFi and acting as an intermediary with regulators, MultiBank Group is able to translate the needs of the industry to those who shape it.

This quality of mediation is essential to ensure that regulation helps develop essential technological advances rather than hinders their establishment and growth. Through the lens of TradFi when looking at the complexity of the cryptocurrency industry, MultiBank Group is able to deconstruct unfamiliar crypto arguments for regulation and create a safer and more secure space.

Where TradFi and Crypto Meet

Regulations are crucial for traders, investors, and everyday users of crypto platforms and their safety when participating in crypto markets. While strict regulations are necessary for stable market integrity, innovation should still be considered, something MultiBank Group considers a priority.

Where TradFi and cryptocurrencies converge, the Group is there to provide a balanced approach to ensure promotion for both the cryptocurrency industry and regulators seeking to protect both retail and institutional investors. This balance is critical to maintaining a thriving space where cryptocurrency innovation can thrive without compromising the security of user funds or data.

As more TradFi institutions like MultiBank Group enter the cryptocurrency space with ever-expanding expertise in regulatory understanding, the future of the industry is increasingly encouraged. The financial freedoms of the cryptocurrency space coupled with regulatory oversight for financial security will be the guiding lights for the future success of the entire cryptocurrency industry.

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