The UK Treasury is planning “robust” regulations on crypto assets following the collapse of crypto exchange FTX last year, which left millions of people suffering billions of dollars in losses.
Crypto is currently unregulated worldwide, companies only have to carry out controls to prevent money laundering. But Britain’s Financial Conduct Authority (FCA) said more than 80 per cent of license applicants were unable to show they could do so properly as “dark money” flows through the sector.
The draft rules, due to be released on Wednesday, would ensure robust, transparent and fair standards consistent with the approach to traditional finance, Finance Services Secretary Andrew Griffith said in a statement on Tuesday.
“We remain steadfast in our commitment to growing the economy and enabling technological change and innovation — and that includes cryptoasset technology,” Griffith said.
The new rules come after rising interest rates led to a spate of industry bankruptcies in 2022, wiping $1.4 trillion (approximately Rs. 11.5 million) from the value of the crypto market. The price of Bitcointhe most traded coin, plunged 60 percent.
The market crisis shook confidence in cryptocurrencies, although interest in the underlying technology, most commonly known as blockchain, remains for other purposes such as payments.
There will be a three-month public consultation on the new plans, followed by proposals for detailed FCA rules.
The ministry said its approach would mitigate the biggest risks in the sector.
“These proposals will give crypto exchanges the responsibility to define the detailed content requirements for registration and disclosure documents – to ensure crypto exchanges have fair and robust standards,” the ministry said.
There will be rules for financial intermediaries to facilitate transactions and custodians to hold client assets.
The failure of FTX and other exchanges sparked calls for industry regulation to protect investors. Regulators are focused on touting open-ended “crypto conglomerates” that combine activities like trading, lending, and custody under one roof, but without traditional regulatory protections between them.
the European Union is already finalizing its first set of crypto rules.
Companies already authorized by the FCA would be allowed to temporarily issue their own promotions while the new regulatory regime is put in place, the ministry said.
© Thomson Reuters 2023
