A few weeks ago, the Treasury’s consultation into the Regulatory Regime for Cryptoassets closed. First published back in February, the consultation asks for views on the Government’s intended regulations of cryptoassets. This is the second main stage in
crypto regulation – moves to regulate stablecoins, where used as a means of payment, are already underway, through the Financial Services and Markets Bill, and the FCA already has some powers around anti-money laundering rules. At FTI, we’ve helped a few clients
with their responses to this consultation, and a good number of respondents have published their responses, so here are a few things I’ve noted.
Consumer Protection
Consumer protection must be central to any regime. Under normal circumstances, this would still be the case, but this point is made more severe by the rising cost of living. Income pressures sometimes drive people to invest in risky assets, looking for a quick
buck, and cryptoassets can be a vehicle for that. The Government have already committed to amending the Financial Promotions Order, to ensure that cryptoasset promotions are subject to Financial Conduct Authority (FCA) rules in the same way as promotions of
other financial products with similar levels of risk. This is a good move.
Market Integrity
Free markets must be fair, too. The Government proposes extending existing market abuse rules to cryptoassets, with adjustments where necessary. Crypto markets aren’t exactly like other financial markets, mostly due to retail participation and technological
differences, so these amendments are necessary to achieve good outcomes. These rules prohibit insider dealing, unlawful disclosure of inside information, and market manipulation by anyone trading a cryptoasset, if the cryptoasset trades on a UK trading venue.
International cooperation
Crypto markets, more than any others, are global. The collapse of FTX in the US is
rumoured to have left 80,000 UK consumers out of pocket. The EU are pressing ahead with MiCA, a slightly different framework, while IOSCO (International Organization of Securities Commissions), and the FSB (Financial Stability Board) set cross-border standards.
Other considerations
Some on the libertarian wing of the Conservative Party champion digital assets, due to their decentralised nature, while some more traditional conservatives express scepticism at the idea of exchanging actual pounds for virtual money. Overall, the Party
are welcoming to the more professional crypto players. Labour are sceptical of whole thing, and describe the industry as a “crypto wild west”. They are, however, more open to CBDC. At the same time, HMT/the Bank are consulting on the digital pound, and looking
at the future landscape for payments in the UK. Crypto and blockchain can revolutionise finance, in payments, and capital markets especially. The UK, with our finance and tech expertise, can be at the forefront of this.
