Key takeaways:
- The UK’s Treasury released a long-awaited consultation paper for future crypto regulation.
- The phrase “stable” would need to be dropped from the algorithmic coin marketing in the crypto promotions.
An eagerly awaited consultation paper from Majesty’s Treasury regarding potential cryptocurrency regulation in the UK has been released. The lengthy 82-page report examines a wide range of subjects, including the issues with algorithmic stablecoins, Non-Fungible Tokens (NFTs), and Initial Coin Offers (ICOs).
According to the Treasury, the ideas aim to position the UK’s financial services industry at the vanguard of cryptocurrency and steer clear of the strict control measures that have gained popularity worldwide during the crypto winter.
The Treasury declared that while cryptocurrency will be governed by the Financial Services and Markets Act 2000 (FSMA) of the United Kingdom, there wouldn’t be a different regulatory framework. The objective is to create parity between traditional finance and cryptocurrency. The Financial Conduct Authority (FCA), the top financial watchdog in Britain, will modify the FSMA’s current standards to suit the digital asset market better.
The requirement for participants in the cryptocurrency market to redo the registration process is at least one annoyance resulting from that choice. They already had to go through the procedure for an FCA license, but now they must be evaluated “against a wider range of measures.”
The good news is that cryptocurrency businesses won’t need to report their market data, unlike traditional finance routinely. Instead, the exchanges would have to store such information and make it accessible at all times.
The Treasury decided against outlawing algorithmic stablecoins, going against some of its foreign peers. Therefore, instead of classifying them as “stablecoins,” it will label them as unbacked crypto assets. However, the phrase “stable” would need to be dropped from the crypto advertising to promote the algorithmic coins.
According to the consultation document, an unique regulatory framework for crypto lending platforms would be considered and should force lenders to consider adequate collateral valuation and backup measures if their most significant market counterparties collapse.
The consultation document received initial positive responses. According to Nick Taylor, manager of public policy for EMEA at the major cryptocurrency exchange Luno, this represents a turning point for the sector. Nick said:
“While there is still a way to go before new rules come into force, we’re encouraged by the scale of the Government’s ambition. “
The deadline for comments is April 30, 2023. The British Government accepts comments from all parties, including financial institutions, academic institutions, trade associations, representative bodies, consumer advocacy organizations, and crypto companies.
