Regulation
Inside the rules that could reignite Rishi Sunak’s UK crypto hub dreams in 2024 – DL News
- Prime Minister Rishi Sunak’s ambitions to make the UK a crypto hotbed depend on a few key dates in 2024.
- This year, the government’s comprehensive framework for digital assets could be completed.
- Other regulatory initiatives will impact crypto investors, exchanges, issuers and banks looking to engage in tokenized securities.
Prime Minister Rishi Sunak’s plans to transform the UK into a crypto hub depend on the outcome of several key dates in 2024.
Next year, his government’s plans to provide clarity for crypto companies will hit milestones, including deadlines to comply with marketing rules and to contribute to new stablecoin rules.
Most importantly, in 2024, the government will launch its phased plan to bring cryptocurrency issuers, exchanges and other service providers under the same financial regulations that govern banks, following consultation with the Her Majesty’s Treasure in 2023.
“The regulatory wheels are already in motion, and next year we will see consultations and proposals materialize into credible operating frameworks,” said Andrew Whitworth, Ripple’s chief policy officer.
“Secondary legislation will create proportionate guidance that will drive the adoption and utility of crypto assets and stablecoins,” he added.
Sunak’s ambitions could also be boosted when the Financial Conduct Authority, Bank of England and Treasury launch their second digital sandbox which will test new ways of managing digital securities.
The results of what the regulatory machinery produces are crucial in determining the Prime Minister’s ability to meet his objectives in 2022. pledge “making the UK a global hub for crypto asset technology,” he said when he was finance minister.
So what are the key dates for UK regulation in 2024?
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British Treasury proposal
In 2024, industry observers expect the government to make a historic rollout of its finalized rules for the crypto industry, as well as rules for stablecoins.
These rules will place key activities – including the issuance, trading, investment, custody and lending of cryptocurrencies – under the Financial Services and Markets Act, the same legal framework that covers the investment banking and insurance.
“In 2024, we will see defined regulation take shape, protecting the millions of investors who actively participate in the digital asset market, as well as an influx of crypto-curious people who are hesitant to engage due to regulatory uncertainty” , Richard Mico, CEO and Global Head of Legal, Risk and Compliance at crypto infrastructure provider Banxa, said: DL News.
The government’s phased approach first tackles stablecoin legislation, with the FCA expected to take over oversight of issuance and custody.
The Treasury, the FCA and the Bank of England have all published plans for this new world. The deadline to submit your comments on this topic is February 6, 2024.
After this date, the FCA will draft new rules on the stablecoin. The Treasury said in October it would be ready “by early 2024”, although this timetable depends on parliamentary leeway.
The second phase will see Treasury rules for wider consultation – covering crypto exchanges, lenders and other service providers.
Mico said he expects to see them before Parliament for final approval in mid-to-late 2024.
FCA Promotion Rules
Early January 2024 marks the latest deadline for crypto companies to comply with the FCA’s marketing and advertising rules.
While most firms had to be ready by October 8, 2023, some FCA-registered firms were given a grace period to ensure they were up to date on the more technical aspects of the rules.
But even that will end on January 8, and the rules will then be firmly in place.
And these rules are strict. Violations constitute a criminal offense punishable by heavy fines and up to two years in prison.
Companies have had to implement technical additions to their platforms – such as risk warning pop-ups and 24-hour cooling-off periods – and these could impact crypto activity in the United Kingdom, Mico said.
Major crypto providers have complained that the rules are too technical and complex. Some – including neobank Revolut, world-leading exchange Binance and payments giant PayPal – have suspended their services in the UK in response.
Digital sandbox
The FCA, BoE and Treasury will launch their second digital sandbox “hopefully at the end of the first quarter”, according to Helen Boyd, head of capital markets at the FCA.
The launch of the sandbox follows a public consultation process launched in mid-2023.
Boyd said at an event in October that the Digital Securities Sandbox “is specifically set up to allow the market infrastructure to test a new set of rules that would allow it to do new things with digital securities.”
“It’s a whole new way of regulating. In the past, we tended to wait for activity to arise and then regulate – it’s here, and now these are the rules,” Boyd said.
“This is a much more iterative process, we expect it to be a learning curve.”
The FCA already runs a digital sandbox that allows software companies to test prototypes under regulatory oversight. DSS, however, is a different concept.
Its intention is to give large financial companies like banks some supervisory leeway, allowing them to experiment in areas where they might run into regulatory barriers.
The EU launched its equivalent sandbox, the Distributed Ledger Technology Pilot, in early 2023.
Do you have any advice on cryptocurrency regulation? Email the author at joanna@dlnews.com.