Cryptocurrency: The UK's New Regulatory Framework Unveiled
United Kingdom Government Unveils Proposed Cryptocurrency Regulations to Fuel Growth and Safeguard Investors
The UK government has dropped a fresh draft regulation for the crypto sector, targeting investor confidence and consumer protection. Here's a breakdown of what this new legislation entails.
A New Set of Rules for Crypto Assets
A 27-page draft document, Order 2025 of the Financial Services and Market Act 2000, along with a policy explainer, introduces a series of novel definitions for crypto assets like stablecoins. Moreover, they aim to regulate acts related to custodying crypto assets and operating crypto exchanges.
In her statement, UK Chancellor of the Exchequer Rachel Reeves expressed, "We're turning Britain into the world's best place for innovation, and the safest spot for consumers, with tough rules on crypto. This'll boost investor confidence, stimulate fintech growth, and shield folks across the UK."
Amendments to Existing Regulations
The UK government's draft legislation seeks to amend select orders of the Financial Services and Market Act, including Order 2001, which outlines regulated activities. Key amendments to the Regulated Activities Order (RAO) include the definition of qualifying stablecoins and crypto assets, classifying them as specified investments, and regulating related activities.
Under the proposed legislation, crypto exchanges, dealers, and agents will fall under the regulatory net, ensuring the curtailment of shady practices while promoting legitimate innovation. Furthermore, crypto firms with UK customers will be required to adhere to stringent standards regarding transparency, consumer protection, and operational resilience.
According to a joint statement from His Majesty's Treasury and Chancellor Reeves, "Exchanges, dealers, and agents will need to obtain authorization to operate, similar to firms in traditional finance."
Moving Towards Greater Collaboration with the US
After discussions between Rachel Reeves and U.S. Treasury Secretary Janet Yellen, both parties agreed to explore closer cooperation on digital securities between the UK and the U.S.
These new regulations come after a 2023 UK Treasury consultation that discussed potential crypto asset regulations, including stablecoins. The government confirmed plans to implement these proposals in November 2023, while emphasizing that they'll roll out final crypto asset legislation as soon as possible, following industry feedback on the draft provisions.
Expanding Crypto Seizure Powers
Earlier this year, the UK introduced a new crime bill that bolstered the authorities' powers for crypto seizures.
As per research conducted by the UK's Financial Conduct Authority, around 12% of UK citizens owned crypto as of August 2024, compared to 4% in 2021.
These comprehensive new regulations pave the way for bringing the crypto industry in line with traditional financial sector standards, while hopefully fostering an environment that encourages innovation and investor confidence.
- The UK government's fresh draft regulation for the crypto sector aims to boost investor confidence and consumer protection, targeting the crypto industry.
- The draft document, Order 2025 of the Financial Services and Market Act 2000, introduces novel definitions for various cryptocurrencies such as stablecoins and aims to regulate their custody and exchange operations.
- In the new legislation, crypto exchanges, dealers, and agents will be required to obtain authorization, similar to firms in traditional finance.
- The UK government plans to implement proposals on potential crypto asset regulations, including stablecoins, which were discussed during a 2023 UK Treasury consultation.
- The new regulations come after a strengthening of the authorities' powers for crypto seizures, as outlined in a new crime bill earlier this year.
- According to the UK's Financial Conduct Authority, around 12% of UK citizens owned crypto as of August 2024, compared to only 4% in 2021.
- The comprehensive new regulations pave the way for aligning the crypto industry with traditional financial sector standards, while hopefully fostering an environment that encourages innovation and investor confidence.
- The UK government, in collaboration with the US Treasury Secretary, has agreed to explore closer cooperation on digital securities between the UK and the US.
