Regulation
UK to introduce new stablecoin and crypto laws by July
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On April 15, 2024, at the Innovative Finance Global Summit, UK Economic Secretary Bim Afolami announced plans to introduce new laws to regulate the issuance and use of stablecoins and cryptocurrencies in the country. This comprehensive regulatory framework is expected to be unveiled by July 2024 and will position the UK as a pioneer in regulating the proliferating crypto industry.
The UK cryptocurrency industry is one of the fastest growing crypto markets in the world, overtaking Germany and the United States after experiencing aggressive growth over the past decade. The popularity of cryptocurrencies in the country and their viability as legitimate assets has seen the country collapse. three million cryptocurrency users. These users are estimated to have a combined wealth of over $3.72 billion in crypto. Additionally, the UK crypto industry generated an estimated revenue of $1.9 billion in 2023 and is expected to reach $2.53 billion in 2024.
This exponential growth and market penetration, as major companies in the UK increasingly adopt digital currencies, has fueled the need for regulation of the sector.
What to expect with the new crypto laws
Today, cryptocurrencies have impacted many industries, from their status as the newest currency facilitating transactions in online banking to the execution of banking transactions. casino demos in online games. Unsurprisingly, the UK aims to foster a vibrant and secure crypto environment in the country by establishing clear rules of operation in the crypto world.
At Global Summit on Innovative Finance, Bim Afolami noted that the final proposals for the scheme were being put in place to ensure that the legislation was passed as soon as possible. He added that many activities related to crypto assets would fall within the regulatory scope for the first time. Some of the expected crypto regulation stipulations include:
● Institution of licensing requirements for stablecoin issuers to alleviate fears of potential financial instability of stablecoins, which are cryptocurrencies whose value is tied to traditional assets or other cryptos.
● Clarity on the tax implications of staking, i.e. when cryptocurrency owners secure their assets to facilitate the validation of a transaction on a blockchain network and guarantee consumer protection.
● Applying stricter controls on the sale and purchase of digital assets on cryptocurrency exchanges to prevent criminal activities in the crypto environment. These platforms will likely be subject to know-your-customer (KYC) and anti-money laundering (AML) protocols, just like traditional financial systems.
● Need for resilient security measures for custodial providers as they store crypto holdings for users for a fee to protect user assets from cyberattacks and other threats.
The UK’s economic secretary said his country aims to attract businesses and investors to the fast-growing sector, while ensuring the country’s consumers are protected from financial risks and fraudulent activity.
The UK’s path to legislation in the cryptocurrency ecosystem
According to UK Financial Conduct Authority, in 2019, only 42% of British adults had heard of cryptocurrencies. However, by 2022, 91% of UK adults knew about cryptocurrencies. Additionally, in 2022, the UK government has expressed interest in regulating the crypto industry.
● Early 2022 – UK Prime Minister Rishi Sunak revealed that the government plans to make the UK financial system supportive of crypto institutions aiming to transform the UK into a leading financial hub. He explained that the focus will be on promoting cryptocurrencies and business operations, investments, innovation and scalability.
● February 2023 – In response to the Government’s agenda to make the UK a global financial hub, the UK’s Financial Conduct Authority (FCA), in partnership with the Bank of England (BoE), began consultations on developing a regulatory framework for stablecoins. These consultations were informed by directives that the FCA would be responsible for regulating the country’s crypto environment. At the same time, the BoE would be responsible for overseeing the operations of stablecoin providers that could impact the UK’s financial systems due to the size and scope of their market.
● July 2023: The UK Law Commission overhauled the country’s crypto laws by introducing four major recommendations that would allow the country to recognize cryptocurrencies and stablecoins as regulated financial activities.
Twelve months after this landmark decision by the UK Law Commission, we anticipate the unveiling of a final regulatory framework for crypto companies and cryptocurrencies. However, this may not be guaranteed due to the upcoming general elections, which are expected to take place in the second half of 2024.
The Labor Party is currently favored to win the election and has previously expressed uncertainty over crypto regulations. If Labor takes over from the Conservative Party in power, delays or revisions to regulations before they are approved could result. If this were to happen, the UK cryptocurrency industry could suffer the same fate as the US cryptocurrency market, which is losing cryptocurrency users to other jurisdictions due to the uncertainty of the regulations in the country.
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