The U.K. government has officially announced its intention to regulate the cryptocurrency industry, with plans to introduce formal legislation by 2024. The decision comes in response to a consultation paper issued earlier this year, outlining recommendations for the regulation of the crypto sector.
The proposed regulations aim to subject several crypto asset activities to the same regulatory standards as banks and other financial services firms. Andrew Griffith, the U.K. financial services minister, expressed his satisfaction with the final proposals, stating, “I look forward to our continued work with the sector in making our vision a reality for the UK as a global hub for crypto asset technology.”
The government’s plans include imposing stricter rules for exchanges, custodians handling crypto on behalf of clients, and crypto lending companies. Additionally, there are proposals for enhanced regulations concerning market abuse, crypto asset issuance, and disclosures.
The government outlines a phased introduction of regulations, with legislation for fiat-backed stablecoins expected in early 2024. Other crypto areas, such as algorithmic stablecoins, will follow suit as the government incorporates lending and trading activities into conventional financial regulation. The Financial Conduct Authority (FCA) will oversee these regulations.
These plans align with a policy set in April 2022 by Rishi Sunak, the current prime minister, aiming to establish the U.K. as a crypto-asset hub.
The government clarified that the proposed regime does not intend to regulate activities related to crypto assets already considered traditional financial instruments, such as traditional securities. The treatment of non-fungible tokens (NFTs) varies, with unique NFTs likened to collectibles or artwork exempt from financial services regulation.
Notably, the government does not plan to ban decentralised finance (DeFi), citing it as premature to regulate this aspect of the industry. Controversies surround the regulation of major cryptocurrencies like Bitcoin and Ethereum, with concerns raised about potential false security for users.