Regulation
UK government publishes final proposals for regulation of Fiat-backed stablecoin cryptocurrencies
The UK government has published its final rules for the crypto ecosystem, saying it plans a gradual introduction of regulation, with legislation for fiat-backed stablecoins will be introduced early next year.
Other crypto domains, such as algorithmic stablecoinswill follow as the government brings activities such as lending and trading into the fold of conventional financial regulation, according to a update posted Monday. These rules will place relevant activities under the responsibility of the Financial Conduct Authority (FCA).
These plans are in line with an April 2022 policy set out by Rishi Sunak, then finance minister and now prime minister, aimed at ensuring that the The United Kingdom, a hub for cryptoassets and are likely to be welcomed by an industry which has complained that the government has been dragging his feet.
In a statement accompanying the document, Treasury Minister Andrew Griffith said he was “very pleased to present these final proposals for the regulation of crypto-assets in the UK”. The finalized framework would mean that “the UK is the obvious choice for starting and growing a crypto-asset business”.
The government has already indicated it wants to integrate crypto into the regulation of traditional financial services – but Griffith has now changed some of its proposals by clarifying the treatment of cryptoassets which it already considers traditional financial instruments as well as non-fungible tokens (NFT).
“The proposed regime does not intend to cover activities related to crypto-assets which are already regulated specified investments,” such as traditional securities, said the government document said, adding that unique NFTs that are akin to collectibles or works of art “should not be subject to financial services regulation.” However, NFTs used as an exchange token, for example where a large number are issued at the same time and do not vary in price much, could fall under future financial services rules.
The FCA will soon consult on an authorization regime for crypto companies, the document said. And the government also plans to formulate equivalence measures for overseas firms: an overseas regulated trading venue could apply to license its branch in the UK, the government has proposed, but it will be up to the FCA to determine what this will look like.
The government also said it had no plans to ban decentralized finance (DeFi), emphasizing that it is premature to regulate this aspect of the industry.
Other documents released by the government indicate that issuance or custody of stable coins backed by fiat currency will be regulated by the existing 2001 rules designed for financial services, with additional rules to ensure that any digital payment system can fail safely without bringing down the financial system. The central bank first launched its consultation on a regime to combat systemic risks. stablecoins in May.
The government’s plans have not been without controversy. Lawmakers on the House Treasury Committee have previously argued that regulating products like Bitcoin (BTC) and ether (ETH) modeled on conventional financial services could lull users into a false sense of security, and the government has already rejected calls to treat crypto like a game of chance.
UPDATE (October 30, 10:36 UTC): Adds additional context, quote from Griffith, details of proposals in paragraphs 7-11.
UPDATE (October 30, 11:49 UTC): Adds NFT information to the seventh paragraph, FCA authorization regime plans and equivalence measures to the eighth, DeFi to the ninth.