Treasury Reveals ‘World’s First’ Proposals to Regulate Cryptocurrency
- Nanna Course
- on Jan 31, 2023
The Treasury has revealed proposals to regulate cryptocurrency, following widespread calls for action after the dramatic collapse of one of the world’s largest exchanges.
Promising a “robust” approach to digital assets compatible with traditional finance, the government says it wants exchanges to have fairer and stricter standards.
According to the plans, crypto platforms would become responsible for defining the requirements that a currency must meet before being admitted to trading.
Exchanges will also be held responsible for facilitating transactions securely and protecting client assets.
It comes after the Deputy Governor of the Bank of England told Sky News that crypto trading is “too dangerous” to stay outside of traditional regulation.
speak in the light of the sudden bankruptcy of the FTX crypto platformSir Jon Cunliffe describes the market as “incredibly volatile” and said investors needed more protection.
Some 80,000 UK-based customers have been affected by the collapse of the world’s second largest crypto exchange, with a British investor left with a £1million hole in his finances.
FTXthe disgraced founder, Sam Bankman Friedhas since pleaded not guilty to stealing billions of dollars in cash from clients.
Are government plans sufficient?
The proposals – which Labor says came too late – come as the crypto industry seeks to win back the trust of frightened investors.
Since the collapse of FTX, the broader market turmoil has seen Bitcoin, the world’s largest token, fall to a five-month low and major exchange Coinbase cut its workforce by 20%.
Less than a year ago, Rishi Sunak, then Chancellor, said he wanted the UK to be a “global center of crypto assets”.
Andrew Griffith, Economic Secretary to the Treasury, said the government was still committed to enabling crypto, but stressed the need to “protect consumers embracing this new technology”.
The plans will first go out for consultation, but the Treasury says the regulation will be a “world first”, suggesting it should arrive ahead of expected EU crypto legislation in 2024.
In the meantime, the Treasury has announced that it will introduce a time-limited exemption to allow more crypto asset firms to issue promotions following a repression of “misleading” advertisements.
Firms registered with the Financial Conduct Authority for anti-money laundering purposes will be allowed to do so while the wider regulations are introduced.
“We’ve been waiting a long time”
Crypto fraud expert Louise Abbott, a partner at Keystone Law, welcomed the proposals.
She told Sky News that crypto’s lack of regulation makes it “extremely attractive to fraudsters”.
“We’ve been waiting a long time in this industry,” she said.
“I deal with fraud and have seen a dramatic increase in crypto scams and fraud over the past 10 years. Last year I received daily inquiries from potential victims who were scammed through of a cryptographic scam.”
Ms Abbot hopes the regulation could be in place as early as the summer, adding that it is in the interest of exchanges and investors to have greater market scrutiny.
Major industry players, including Binance chief Changpeng Zhao, who saw his platform banned in the UK in 2021and Coinbase’s Brian Armstrong have previously welcomed the prospect of increased regulation.
“Unless we become a safer environment, investors will not invest as we have seen,” Ms Abbot added.
Varun Paul, a former head of fintech at the Bank of England, now of crypto infrastructure provider Fireblocks, also described the plans as a “positive step”.
He told Sky News the turmoil in the industry meant there was a need for “clear rules” and expressed hope UK regulations would get the job done while encouraging innovation.
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