Britain is set to introduce specific laws aimed at regulating the cryptocurrency industry within the next 12 months, according to Andrew Griffith, economic secretary to the U.K. Treasury.
The move comes as the U.K. aims to position itself as a “global hub for cryptoasset technology.”
In February, the British government laid out plans to regulate cryptoassets and opened its suggestions for consultation, with the consultation period ending on April 30th.
Following Britain’s exit from the European Union, Griffith told CNBC that the country now has the ability to “move in an agile and proportionate way,” taking advantage of this new-found regulatory freedom.
This positions the U.K. in contrast with jurisdictions like the U.S., which has taken a hard line on cryptocurrency firms.
Great meeting today with UK Economic Secretary and City Minister @griffitha.
The UK is moving fast on sensible crypto regulation to both drive economic growth AND consumer protection. Excited to keep investing in the UK. pic.twitter.com/478PQSLmDe
— Brian Armstrong (@brian_armstrong) April 17, 2023
UK Aims for “Global Hub for Cryptoasset Technology” Status
Rishi Sunak, then U.K. finance minister and now prime minister, previously expressed his ambition to make Britain a “global hub for cryptoasset technology.”
Crypto companies are seeking clarity around rules and are pushing for governments to establish frameworks for their operations.
In response, Griffith stated that the U.K.’s regulatory approach would mix both existing regulations and new ones, focusing on the same transaction being regulated in the same way, while also taking advantage of opportunities in the cryptoasset and distributed ledger space.
The Financial Services and Markets Bill, currently making its way through Parliament, is an example of upcoming legislation that already includes provisions on cryptocurrency.
The law, which is not yet in force, aims to bring asset-backed stablecoins into the regulatory fold.
A few points we shared:
1. Some UK banks are blocking fiat payments to crypto companies which is not ok.
Good fraud controls make sense, a blanket ban does not (and is likely not lawful). Needs further education and collaboration.2. The Financial Promotion regime goes too far…
— Brian Armstrong (@brian_armstrong) April 17, 2023
Britain to Introduce Crypto-Specific Laws in 12 Months
The Financial Conduct Authority (FCA), the U.K.’s main financial regulatory body, currently oversees cryptoasset firms’ anti-money laundering (AML) and terrorist financing procedures. However, cryptoassets themselves are generally not regulated, except for security tokens.
The U.K. Advertising Standards Agency (ASA) has also increased its scrutiny of cryptoasset promotion to consumers, regulating social media, web pages, and ads.
AML regulations for cryptoassets still vary considerably between jurisdictions, with many yet to implement international standards set out by the Financial Action Task Force (FATF).
Britain’s finance ministry has set out draft rules to regulate cryptoassets, including bringing centralised cryptoasset exchanges into financial services regulation for the first time.
The rules would cover crypto-related admission to a trading platform, making a public offer, executing payment transactions or remittances, arranging deals, operating a platform, custody, and mining transactions, or operating a node on a blockchain.
Crypto firms in Britain or those providing services to the U.K. would be subject to these rules, with firms needing a licence, minimum capital, and liquidity requirements. The FCA would decide if a foreign operator requires a physical presence in the U.K.
With 5-10% of adults in Britain now owning cryptoassets, up more than 100% over the past one to two years, and institutional investor participation growing, the U.K. is set to make significant strides in cryptoasset regulation.
After the three-month consultation, secondary legislation and detailed rule proposals for public consultation from the FCA are expected later this year.
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