The government is attempting to control some of the negligent corporate practices that have developed in the last year and are linked to the downfall of FTX. The U.K. officially unveiled intentions to oversee the cryptocurrency industry.
The government put forth an array of recommendations in a much-awaited industry discussion that was opened with the objective of bringing the governance of crypto asset firms to par with that imposed on conventional financial institutions.
One of the ideas announced could make it more difficult for financial intermediaries and administrators to hold cryptocurrency on their client’s behalf. The growth of dangerous loans issued among various crypto businesses and the absence of proper research on the participants in those agreements were two major themes that developed in 2022.
According to a press statement, the U.K. measures aim to establish a
“robust world-first regime strengthening rules around the lending of crypto assets, whilst enhancing consumer protection and the operational resilience of firms”and would put a stop to these operations.
Andrew Griffith, the Treasury’s economic secretary, commented on a statement:
“We remain steadfast in our commitment to grow the economy and enable technological change and innovation, and this includes crypto asset technology. But we must also protect consumers who are embracing this new technology by ensuring robust, transparent, and fair standards.”
The efforts of international regulators to control the regulatory-averse crypto industry have become more urgent with the bankruptcy of FTX. To strengthen financial regulations in cryptocurrency, both the European Union and the United States have posted their own suggestions.
“Recent events in the crypto market reinforce the case of timely, clear, and effective regulation,”Griffith stated in a speech on December 2.
The collapse of FTX, which reportedly exploited customer funds to conduct dangerous loans and trades, triggered a series of bankruptcies for companies lending on digital assets that had exposure to the crypto giant, including BlockFi and the Genesis lending arm of Digital Currency Group.
The measures published on Tuesday would also impose stricter transparency regulations on cryptocurrency exchanges, requiring them to publish pertinent disclosure papers and establish definite admittance standards for trading digital assets.
A further plan would loosen stringent regulations on cryptocurrency advertising, enabling companies registered with the Financial Conduct Authority to run their own campaigns until the more comprehensive crypto framework is implemented.
The enforcement action coincides with the coldness of a deep recession known as crypto winter being felt by cryptocurrency firms in the UK and elsewhere.
After the collapse of FTX and a drop in cryptocurrency prices, investors are slashing company values, and the sector has also been afflicted by multiple waves of layoffs. The London-based cryptocurrency exchange Luno downsized 35% of its staff last week, affecting roughly 330 positions.
It requires a while to regulate. Even before proposals are passed by Parliament, it will probably take years. Parliament is still debating the Financial Services and Markets Bill, which might classify digital currency as a regulated good. The measure intends to increase the nation’s financial industry’s competitiveness after Brexit. Nevertheless, some business leaders claim that even the most basic demonstration of taking action is significant.
The UK will benefit greatly from having a legislative roadmap or regulatory direction of travel, according to Julian Sawyer, CEO of Standard Chartered-backed crypto custody services provider Zodia Custody, in an interview with CNBC.
According to Sawyer, who previously co-founded the British fintech company Starling and oversaw Gemini’s worldwide expansion, it’s crucial to guarantee
“general alignment between global markets in terms of the approach to digital assets.”
He pointed out that with its Markets in Crypto-Assets law, which is scheduled to take effect in 2024, the European Union has acquired an early start.
Bitcoin, which has covertly increased by about 40% since the beginning of 2023, was selling at a steady price of $23,103 the next day.
Ambitions for a Global Crypto Center:
The United Kingdom aspires to dominate the world in blockchain and cryptocurrency technology. These objectives, which were initially outlined in April 2022, have been hampered by disorganized governments.
Market participants view Rishi Sunak, who assumed control of the U.K. in October 2022, as a crypto-friendly prime minister. He has earlier noted that he is
“determined” to make the U.K. “the jurisdiction of choice for crypto and blockchain technology.”
Industry experts repeatedly indicated that cryptocurrency might be a method for London to increase its prospects as it seeks to engage with other EU financial centers after Brexit.
According to Jordan Wain, U.K. public policy director at Chainalysis,
“there is an opportunity to provide clarity to the industry and allow it to play its role in achieving its mandate to encourage firms to invest, to innovate, and to create jobs in the U.K.”
In order to establish more specific laws, Sunak’s administration will communicate on its intentions to implement an additional set of regulations specifically for cryptocurrency enterprises. The consultation is expected to end on April 30.
Information from CNBC