UK HM Treasury has published the final results of the consultation on the regulatory regime for crypto assets.
The UK government has confirmed its final proposals for cryptoasset regulation in the country. It intends to bring several crypto asset activities such as custody, lending, and centralised cryptoasset exchanges into the regulatory perimeter for financial services for the first time.
The future financial services regulatory regime for cryptoassets was first published on 1 February 2023 and closed on 30 April 2023. The following months were dedicated to consultations. Finally, the proposed regime received feedback from HM Treasury and can be further developed in a legislative manner.
Within the consultation, the regulators received responses from 131 interested parties. These included crypto-native firms and fintechs, industry associations, traditional financial institutions, members of public or academic circles, consumer groups, and legal or consulting firms. In addition, since publishing the proposals, HM Treasury has engaged in discussions with over 80 organisations through a series of multilateral workshops and roundtables.
Around 80% of all responses were broadly supportive of the government’s overall approach, while the remaining 20% equally divided between neutral and critical approaches.
Some of the received feedback dealt with clarifying proposed treatment of NFTs, security and utility tokens, further consideration of overseas firms regulatory status, setting stronger distinctions between services provided to professional / sophisticated investors vs retail consumers, and more.
Therefore, some modifications to the original proposals were made by the Treasury. The updated guidance confirms that the proposed regime does not intend to capture already regulated activities such as security tokens. Besides, the upcoming regulation won’t refer to NFT collectibles as financial services or products, subject to relevant laws. As for the other crypto assets, the government still intends to include them in the list of ‘specified investments’ in Part III of the RAO, under the financial services regulatory framework established by FSMA, rather than develop a standalone regime.
Regarding the criticism of broad definition of cryptoassets, the regulator responded that it’s intentional so that the government can “regulate not only those types of cryptoasset that currently exist but also those that may exist in future,” without futher modifications.
The clarification also “acknowledges the need to mitigate the fragmentation of cryptoasset liquidity that could arise from a restrictive location and market access policy.” Therefore, the government should facilitate access to international liquidity pools under specific circumstances.
With the proposed regulation, the UK government aims to realize its firm ambition “for the UK to be home to the most open, well-regulated, and technologically advanced capital markets in the world.”
HM Treasury is separately publishing an update on the regulation plans regarding fiat-backed stablecoins.
Earlier, it was reported that UK lawmakers introduced the Economic Crime and Corporate Transparency Bill to crack down on money laundering and fraud facilitated by crypto assets. It will enable authorities to ‘seize, freeze and recover’ crypto assets involved in criminal activities.