Government announces crypto regulation proposals
Insiders see crypto as a means for London to compete with European financial hubs
The UK government is moving forward with its plans to regulate cryptocurrency firms, to shield consumers from the risks associated with cryptoassets.
HM Treasury has intimated it intends to regulate crypto-asset operations in a manner similar to traditional finance, to provide better clarity and confidence to both consumers and companies.
The newly-unveiled measures, currently just proposals, will impose stringent transparency standards on cryptocurrency exchanges, requiring them to post essential disclosure documents and establish clear admission criteria for trading digital tokens.
The government also plans to strengthen rules governing financial intermediaries and custodians, who are responsible for facilitating transactions and properly preserving client assets.
"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 government said.
However, it added it would "temporarily" backtrack on an earlier commitment to bring cryptocurrency promotion regulations in line with those that apply to stocks and insurance products.
The move comes in the wake of a number of high-profile scandals affecting the crypto world over the last year, including the twin collapses of Sam Bankman-Fried's FTX cryptocurrency exchange and of lender Celsius, which left people around the world with billions of dollars in frozen funds; as well as various hacks, thefts and links to organised crime.
Investors are now slashing the values of crypto firms as a result of the FTX collapse and the drop in cryptocurrency prices.
The London-based cryptocurrency exchange Luno fired 35% of its staff last week, affecting roughly 330 roles.
Lawmakers and regulators across the world are advocating global collaboration to address the threats and opportunities associated with cryptocurrencies and blockchain technology.
Last year the CEO of UK regulator the Financial Conduct Authority (FCA), Nikhil Rathi, emphasised the need for global laws to "keep markets clean." He said crypto regulation was "a high priority," and discussed the importance of regulatory work between the UK and USA.
Market players see Prime Minister Rishi Sunak, who has previously said he is determined to make the UK "the jurisdiction of choice for crypto and blockchain technology," as a crypto-friendly leader.
As London seeks to compete with EU financial hubs post-Brexit, industry insiders believe crypto could help.
"We remain steadfast in our commitment to grow the economy and enable technological change and innovation - and this includes cryptoasset technology," said Economic Secretary to the Treasury Andrew Griffith.
"But we must also protect consumers who are embracing this new technology - ensuring robust, transparent, and fair standards."
The Labour Party attacked the decision, stating that the administration needed to stop using consultations.
"We need action now," said Tulip Siddiq, Labour shadow city minister.
"Millions of British consumers' savings have been put at risk by the collapse of cryptocurrencies while crypto-related scams have hit record levels."
After the consultation ends on 30th April, the government will review the feedback and work to formulate its response.
The FCA will consult on its specific regulations for the industry when legislation is introduced.