The government’s steps to regulate the crypto space have been described as ‘a welcome step in enhancing trust and confidence’ within the space.
It follows the UK Treasury’s consultation into crypto regulation, which outlined that cryptoassets should follow the same standards of financial services.
The consultation stated: “Cryptoassets and the activities underpinning their use should follow the standards expected of other similar financial services activities.”
As a result of this, the government has laid out plans for a new framework that embraces cryptocurrencies and cryptoasset growth. The framework will function parallel to the requirements of the Companies Act 2006.
Chris Ford, Head of Government Affairs EMEA at R3, stated: “Whilst full details of the government’s crypto regulation plans are still to be seen, the introduction of regulatory measures are a welcome step in enhancing trust and confidence in the distributed ledger technology behind it.
“Regulatory and legal certainty are fundamental ingredients for the success of any emerging technology, so it’s pleasing to see the government recognise the role that DLT can play in driving growth and helping to set the UK apart amidst rising international competition.”
“Sensible, proportionate regulation can provide clear guidelines on how DLT should be applied, who may use it and for what purpose. The government is forging a path ahead for financial institutions to reap the full benefits of this technology, creating an environment conducive to investment and innovation.”
Newly implemented frameworks would mean that the regulation of cryptocurrencies will be activated once a cryptoasset or token begins trading on a regulated exchange platform.
Despite this development, the Treasury made it clear that it “does not intend to directly regulate the “creation” of unbacked cryptoassets under financial services regulation”.
“The government’s firm ambition is for the UK to be home to the most open, well-regulated, and technologically advanced capital markets in the world,” added Economic Secretary to the Treasury, Andrew Griffith.
“Delivering on this ambition means taking proactive steps to harness the opportunities of new financial technologies.
“Effective regulation will create the conditions for cryptoasset service providers to thrive in the UK, and give people and businesses the confidence to invest with an understanding of the often high risks involved.
“We have already begun to deliver on this ambition through the Financial Services and Markets Bill, by laying the legislative foundations to bring stablecoins and cryptoassets into financial services regulation.”
Payment Expert Analysis: As the UK prepares to tighten the regulatory framework around the crypto sector, the coming year will inevitably be pivotal for the space, especially as it looks to bounce back from turbulence in 2022.