UK Treasury Publish Final Proposal For Crypto Regulation

In response to the United Kingdom Treasury’s consultation on a concise regulatory regime for crypto assets, the government has published a detailed final proposal for the regulation of digital assets and related offerings in the region. A look at the proposal demonstrates the UK government’s intention to have some crypto-related activities under the perimeter of financial service regulation.

“The government’s position is that firms dealing directly with UK retail consumers should be required to be authorized irrespective of where they are located,” the proposal detailed.

Crypto Consultation Paper Goes Public 

Earlier this year, the UK Treasury made public a consultation paper highlighting its plans to regulate crypto platforms and exchanges operating in its region to protect customers and show openness towards technological advancements. Precisely, the consultation paper focused on guidelines for regulating digital asset service providers, lending transactions, and how digital assets are stored. 

Andrew Griffith, a UK MP (Member of Parliament) and economic secretary to the Treasury and financial services minister honoured an interview with CNBC where he announced the coming of the crypto regulation. Most of his statements suggested the UK government is putting effort to bring the digital asset sector to the standard of traditional banking in terms of regulation.

Crypto Businesses to Register With FCA 

In light of the newly published final proposal, all firms that wish to offer crypto services or any other offering related to the crypto sector, will be required to obtain authorization from UK watchdog the Financial Conduct Authority (FCA). 

It is worth noting that the proposal does not cover Decentralized Finance (DeFi) regulation. This is because “HM Treasury recognizes that it would be premature and ineffective for the UK to regulate DeFi activities currently.”

Ripple Effect of FTX Collapse 

The push to move forward with the establishment of this robust regulatory framework was mandated by some companies and industry experts. It was also informed by the recent occurrences in the market including the unfortunate collapse of Bahamian-headquartered cryptocurrency exchange FTX which happened about a year ago. 

Since the implosion of FTX, which caused a wide contagion spread to many other firms and triggered a price fall for crypto coins, there has been a common trend amongst governments to roll out robust regulation that will prevent a recurrence.