Britain to Introduce New Regulations for Crypto Sector
The United Kingdom has announced plans to implement its first set of rules to regulate the cryptocurrency sector. The move comes as concerns grow over the potential links between digital currencies and mainstream finance, as well as the need to protect consumers.
Cryptoassets remain a small part of the global financial system, but their popularity has been on the rise. Bitcoin, in particular, has seen a surge in price recently, following the collapse of FTX crypto exchange, which raised concerns about the sector’s impact on consumers.
The European Union has already approved the world’s first comprehensive rules for cryptoasset markets, leading some firms to set up base in the bloc. Now, the UK is set to follow suit, with the finance ministry planning to introduce regulations proposed in a public consultation held in February.
Under the new rules, firms undertaking cryptoasset activities will need to be authorized by the Financial Conduct Authority (FCA). The focus will be on regulating cryptoassets like bitcoin, as well as the underlying distributed ledger technology (DLT) or blockchain that forms the basis of the sector.
“The government’s proposed measures have been informed by recent market events – including the failure of FTX – which reinforce the case for effective regulation and sector engagement,” the finance ministry stated.
While the UK government aims to create a regulatory environment that fosters innovation, it also prioritizes financial stability and consumer safety. The accelerated implementation of the new rules is meant to provide much-needed clarity to the sector, with secondary legislation set to be presented to parliament next year.
Currently, crypto firms only have to meet requirements related to anti-money laundering safeguards. However, the new regulations will bring them under closer scrutiny and ensure they adhere to the necessary standards.
This announcement comes at a time when cryptocurrencies are experiencing a revival. Bitcoin, the largest cryptocurrency by circulation, reached its highest value in nearly a year and a half last week, hitting $38,872. Speculation surrounding the imminent introduction of an exchange traded bitcoin fund in the United States has contributed to the renewed interest.
As the UK prepares to implement its first rules for the crypto sector, it seeks to strike a balance between encouraging innovation and safeguarding the financial system and consumers. The move is part of a global trend towards regulating digital currencies to address potential risks and ensure the responsible development of this emerging asset class.
More detail via Reuters here… ( Image via Reuters )