Key takeaways :
- UK finalizes cryptoasset regulations, integrating the industry into traditional financial service regulations.
- Treasury releases a report with responses and updated changes to proposed regulations following consultation.
The UK government has taken a significant stride in the realm of digital finance by releasing its final set of regulations governing the cryptocurrency ecosystem. It has articulated its intentions to gradually implement this comprehensive framework, with a focus on introducing legislation pertaining to fiat-backed stablecoins early next year.
As outlined in the recent update, the government’s approach is to encompass lending and trading activities within traditional financial regulations, while other cryptocurrency sectors, such as algorithmic stablecoins, will follow suit. This regulatory shift will place pertinent activities under the jurisdiction of the Financial Conduct Authority (FCA).
These regulatory guidelines come as a result of a consultation released in February regarding the future of financial services regulation for cryptoassets in the UK. Engaging in this consultation process were numerous companies and stakeholders, who actively contributed their insights to refine the government’s proposed approach.
Andrew Griffith, the economic secretary to the Treasury, emphasized, “While most aspects of our proposals were well-received by the large majority of respondents, we have modified certain features of our future framework to take onboard the evidence presented.”
The Treasury’s primary objective is to regulate fiat-backed stablecoins in two critical areas: their utilization within payment systems and their issuance and storage within the UK, irrespective of their specific applications.
This regulatory foundation was established upon the Financial Services and Markets Act (FCMA) 2023, which successfully passed in the upper chamber of the British Parliament in June 2023. Throughout the document, this bill is officially referred to as the FCMA 2023. Under this legislation, the Treasury, the Bank of England, and the FCA gain the authority to regulate cryptocurrencies and, more specifically, stablecoins.
This recent announcement signifies a significant leap forward in the UK’s efforts to construct a robust regulatory framework for digital currencies. With a distinct focus on fiat-backed stablecoins, the government aims to cultivate trust and confidence in these digital payment instruments while concurrently mitigating associated risks. The move toward regulation reflects the UK’s commitment to embracing the potential of digital finance within a structured and secure framework.