The UK has published its long-awaited regulatory plans for the cryptocurrency ecosystem. There is a phased approach. Accordingly, he set the course for a comprehensive regulation. This plan aims to position the UK as a preferred destination for the crypto industry. However, there are also harshnesses.
The first stage in cryptocurrency regulation
The first phase of this regulation will look at fiat-backed stablecoins. Accordingly, when we look at Kriptokoin.com, it is expected that the legislation will come into force in early 2024. This proactive move comes after concerns were raised about the speed at which the government was meeting the needs of the sector. The proposed regulation would expand to other areas of cryptocurrency, including algorithmic stablecoins. As activities such as lending and trading are integrated into traditional financial regulations, the Financial Conduct Authority (FCA) will oversee these matters.
The plan is in line with the cryptocurrency asset hub strategy outlined by Chancellor Rishi Sunak, who laid the groundwork for the legislation in April 2022 while serving as chancellor of the exchequer. This comprehensive framework will receive a warm welcome from the crypto industry, which has expressed disappointment over the government’s delay in addressing the industry’s regulatory needs.
Treasury Secretary’s vision
Treasury Secretary Andrew Griffith expresses his excitement for final proposals for cryptocurrency regulation in the UK. The revised framework has a purpose. It is expected to position the UK as an obvious choice for the launch and expansion of crypto asset businesses. The regulatory journey began with the Treasury’s crypto consultation, which launched in February and concluded in April. Parliament passed the Financial Services and Markets Act 2023 in June, establishing cryptocurrencies as a legal activity.
The government is committed to integrating crypto into existing financial services regulation. However, Griffith provided clarity on the treatment of crypto assets. The document emphasizes activities related to crypto assets that are already established, like traditional securities. Accordingly, it is stated that these cryptocurrencies will not be covered by the proposed regime. Additionally, unique non-fungible tokens (NFTs) that resemble collectibles or works of art will be exempt from financial services regulation. However, NFTs used as exchange tokens may fall under future financial services rules.
Upcoming consultations and overseas measures
The FCA will soon launch consultations on an authorization regime for cryptocurrency companies. Accordingly, the government plans to create equivalence measures for overseas companies. This means an overseas regulated trading house can apply to authorize a UK branch. The exact criteria for this will be determined by the FCA.
The government in particular feels that it is too early to regulate this aspect of the industry. For this reason, he stated that he does not plan to ban decentralized finance (DeFi). The issuance or custody of stablecoins backed by fiat currency will be regulated under the existing 2001 rules for financial services.
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