UK Moves to Regulate Crypto for Better Consumer Protection

Great
Britain is preparing the ground for cryptocurrency regulation in the country in
the future, the UK’s government announced on Wednesday. Public consultation has
been launched as a first step to prepare a draft law on regulating digital
assets.UK Starts Crypto
Regulation WorksAccording
to the official press release published on the government website, the UK wants
to protect its consumer better and allow the crypto industry to grow within the
regulated ecosystem. The new crypto rules will aim to exclude the risk of bad
actors entering the market and reduce the risk of <a href=”https://www.financemagnates.com/terms/m/money-laundering/” class=”terms__main-term” id=”f30ffb65-351e-44d6-9dae-0714f08b59b2″ target=”_blank”>money laundering</a> activities using
a decentralized and anonymous crypto niche.”We
remain steadfast in our commitment to grow the economy and enable technological
change and innovation – and this includes cryptoasset technology. But we must also
protect consumers who are embracing this new technology – ensuring robust,
transparent, and fair standards,” Andrew Griffith, Economic Secretary to
the Treasury, commented on the proposed regulations.The UK
government points out that cryptocurrencies, as an emerging sector, still experience
heightened volatility. In addition, the recent high-profile collapse of many companies
following <a href=”https://www.financemagnates.com/cryptocurrency/ftx-the-rise-the-fall-and-the-reaction/” target=”_blank” rel=”follow”>the bankruptcy of the FTX exchange</a> has exposed the ‘structural vulnerability’
of some business models prevalent in the industry.”Our
robust approach to regulation mitigates the most significant risks, while
harnessing the advantages of crypto technologies. This enables a new and
exciting sector to safely flourish and grow, boosting jobs and investment,”
the press release added.In April
2022, <a href=”https://www.financemagnates.com/cryptocurrency/why-the-wild-west-crypto-market-faces-and-needs-regulation/” target=”_blank” rel=”follow”>John Glen MP, then Economic Secretary, set out plans</a> to regulate
stablecoins and to transfer Great Britain into one of the global crypto hubs. From
2022, the Financial Conduct Authority (FCA) has the right to supervise
cryptocurrency businesses in relation to money laundering and terrorist
financing risks. As a result, companies wishing to operate in the local market
must obtain authorization from the regulator. However, <a href=”https://www.financemagnates.com/cryptocurrency/education-centre/is-cryptocurrency-legal-in-the-uk/” target=”_blank” rel=”follow”>the
industry is not regulated from an individual customer’s point of view</a>. In case
of lost funds due to the exchange collapse or the loss of a private key, the
investor cannot rely on the Financial Services Compensation Scheme. FCA’s
announcement in November following the collapse of FTX was a prime example when
the institution reiterated that <a href=”https://www.financemagnates.com/cryptocurrency/fca-has-no-good-news-for-ftx-customers/” target=”_blank” rel=”follow”>it is not responsible for regulating crypto</a> and
investors are most likely left to face this problem on their own.Watch the recent FMLS22 panel on the regulation roundup for 2023.When Will UK Start Crypto
Market Regulations?Although the Treasury has not set a date for the final cryptocurrency market <a href=”https://www.financemagnates.com/terms/r/regulation/” class=”terms__secondary-term” id=”341d154e-1396-4d12-a357-4837e79c4146″ target=”_blank”>regulation</a>
or publishing a draft bill, the current public consultation that was launched
on 1 February will run until 30 April. After that, the government will review
the feedback and begin preparing a response. Once the draft
regulations are in place, the FCA will hold an individual consultation with the
industry to discuss how the cryptocurrency sector will operate once the new
rules are implemented. The UK’s
proposed rules are intended to make cryptocurrency systems responsible for
setting out detailed requirements for the content of disclosure and admission documents,
ensuring robust and fair standards for all trading platforms. The regulations also apply to custodians and financial intermediaries responsible for
holding assets belonging to clients.”These
steps will help to deliver a robust world-first regime strengthening rules
around the lending of cryptoassets, whilst enhancing consumer protection and
the operational resilience of firms,” the statement added.Time Limited Exemption for
Crypto FirmsThe UK
government has also announced that, following concerns about the small number
of crypto firms that the FCA authorizes to issue their own promotions, Treasury
is introducing a time-limited exemption.It means
that digital asset firms authorized by the FCA for anti-money laundering
purposes will be able to issue their promotional materials before the new regulatory
regime is presented.<a href=”https://www.financemagnates.com/cryptocurrency/can-mica-take-europe-to-the-crypto-promised-land/” target=”_blank” rel=”follow”>The
European Union is working on its own cryptocurrency regulations</a> under the
Markets in Crypto-Assets regulation (MiCA) proposal. MiCA seeks to regulate
issuers of stablecoins and other unbacked crypto-assets such as Bitcoin.