The UKs New Big Bang for Crypto Regulation

The Government is not sure there is justification to regulate mining in and of itself, but seeks views on whether any other regulatory outcomes should be pursued. Although the level of investment advice and portfolio management for cryptoassets is currently limited, there is potential for growth. The crypto industry is inherently speculative with high volatility, which means that existing regulations governing those activities in traditional finance might not be adequate.

• Firms will be subjected to disclosure requirements when admitting a cryptoasset to a trading venue and/or making a public offer of cryptoassets .
• Cryptoasset firms cannot currently have this status and most regulated firms are unwilling to promote another firm’s products.
• The Consumer Rights Act 2015 and the Consumer Protection from Unfair Trading Regulations 2008 apply in relation to consumers and provide them with statutory rights and remedies against suppliers of goods, services and digital content.
• The British treasury in February unveiled its proposed regulations for the industry in February, saying it would subject crypto firms to the same oversight as traditional finance companies.
• The financial promotion rules under FSMA apply to any communication that is capable of having an effect in the UK.

The failure of FTX and other exchanges triggered calls for regulation of the industry to protect investors. The ministry said its approach would mitigate the most significant risks in the sector. There will be a three-month public consultation on the new plans, followed by proposals for detailed rules from the FCA.

Cryptocurrency Regulations UK – Exchanges

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the money driving “Web3”. “The wide scope of the (UK’s) planned set of rules is similar to the EU’s MiCA regulation, yet there are many differences in areas such as exchange or stablecoin regulation,” said Ivan Kachkovski, FX and crypto strategist at UBS. Surveys show that 5-10% of adults in Britain now own cryptoassets, an increase of more than 100% over the past one-two years, with participation by institutional investors also growing, the ministry said. Cryptoassets, such as bitcoin , have little direct regulation globally, but regulators are taking a closer look after the downfall of FTX last year, which left millions of investors nursing losses totalling billions of dollars, some of them in Britain. However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining. Britain could introduce specific laws aimed at regulating the cryptocurrency industry in the next 12 months, a top lawmaker told CNBC.

The UK government proposes to regulate cryptoasset activities provided “in or to the United Kingdom” . As such, non-UK providers would generally be in scope of the new requirements where they provide services to UK customers from outside the UK. This is another marked difference from MiCA, which does not address lending activities.

UK Proposes Regulatory Regime for Cryptoassets

The Treasury Consultation refers to the FTX scandal on a number of occasions and ensuring the protection of clients’ crypto-assets and orderly wind-down arrangements in the event of insolvency are clearly key considerations for the Government. The financial promotion rules are being fast-tracked and will come into force within 4 months of being made in the UK Parliament. Introduce a new exemption , that will permit crypto firms registered under the MLRs to communicate their own promotions. Activities that are truly open-source and decentralised become very difficult to regulate, so regulatory responsibility could be shifted, for example, to the exchanges and those firms that facilitate consumer access to DeFi. Under the FSM Bill, HM Treasury will be empowered to establish a supervisory regime for issuers of stablecoins used for payment.

The People’s Bank of China bans crypto exchanges from operating in the country, stating that they facilitate public financing without approval. The Biden administration’s new framework also sees “significant benefits” from creating a central bank digital currency or a digital form of the U.S. dollar. The European Union became the first to adopt measures requiring crypto service providers to detect and stop illicit cryptocurrency uses.

Taxation

They can scan customers’ on Sanctions and PEP lists from more than two hundred countries. In this way, with Sanction Scanner, crypto businesses can comply with regulations and be protected from regulatory penalties. However, cryptocurrency regulations in the UK are criticized as being very complex, and many other issues need to be addressed.

Platforms such as cryptoasset exchanges which undertake multiple cryptoasset activities on a “vertically integrated” basis will need to follow rules covering all those activities. Firms that are already authorised under FSMA and intend to undertake a cryptoasset activity will generally need to apply for a variation of their permission. Also, in April 2022, the UK government set out plans and announced moves that will see stablecoins recognized as a valid form of payment as part of wider plans to make the UK a global hub for technology and investment in crypto assets. The House of Commons, the lower house of the British Parliament, approved the recognition of crypto assets as regulated financial instruments on October 25. As part of the draft bill, current laws regarding payments-focused instruments will be extended to stablecoins.

UK Crypto Firms to Get Broad Laws, May Need New Authorization

Recently, the FCA was found to have acted unlawfully in introducing other rulemaking in this area. The FCA attempted to introduce a new “solely or primarily responsible” test for the payment of FCA compensation under its complaints scheme by way of a Remedies Statement that was published in June 2020, without consultation. The FRCC published a report in response to widespread complaints about the Remedies Statement, which found that the introduction of this test was unlawful. The FCA chose to ignore the FRCC’s recommendations that the test be removed (see the FCA response to the FRCC’s report), and it remains on the FCA’s website.

To determine whether the financial promotion regime applies to cryptoassets, one must determine whether the activities involve a controlled activity or controlled investment by referring to the FPO. Generally speaking, sales of classic cryptocurrencies should not engage the regime, nor will utility tokens or e-money tokens as they are unlikely to constitute controlled investments. The legislative foundation for the regulation of cryptoasset promotion activities and stablecoins https://xcritical.com/ is the Financial Services and Markets Bill (the “Bill”). In the UK, there has been progress in the development of a regulatory framework for cryptocurrency and digital assets, spearheaded by the appointment of the Financial Conduct Authority , which oversees cryptocurrency for anti-money laundering and counter-terrorism financing activities. All UK crypto exchanges need to be FCA registered, however some can obtain e-licenses instead of registering under the FCA.

Amid the latest crypto crackdown in the United States, Coinbase CEO Brian Armstrong appears to be turning to the UK and Europe.

A testator should instruct their personal representative on how to acquire the cryptographic keys and details of wallet service providers, otherwise the value of cryptoassets left to beneficiaries of an estate will be lost. Reporting requirements contained in financial regulation cryptocurrency regulation uk or AML legislation may apply in relation to cryptocurrency transactions. The MLRs also contain a broad reporting requirement applicable to CEPs and CWPs, which means that they must produce information that the FCA requires relating to their compliance with the MLRs.

Other United Kingdom chapters:

There will be differences between the application of these requirements depending on the type of activity a firm is undertaking. It is not proposed at this stage to impose detailed regular reporting requirements on all authorised cryptoasset firms. The main obligation for reporting will fall on trading venues, although this approach may be adjusted in the future. In January 2022, the government published a consultation response setting out its intention to legislate to bring the promotions of certain cryptoassets within the FCA’s remit.