While the UK government is serious about introducing the new rules, if it becomes law, it will take several years to complete and implement its provisions.
The UK is stepping up its role in regulating the digital currency system, as it recently unveiled its new guidelines for overseeing the industry. As reported by CNBC, one highlight is to curb the activity of crypto trading platforms in order to curb the series of events that triggered the collapse of the FTX derivatives exchange.
Under the proposed regulation, UK regulators will focus on curbing highly leveraged digital currency lending that has characterized the digital currency industry. Given the volatility in the industry, these trading services are particularly high-risk and can force virtual asset service providers (VASPs) into losses.
Reporting standards for crypto trading platforms will also be tightened and the UK government will seek to rein in operational excesses as seen in FTX. One of the main reasons FTX imploded was because founder and former CEO Sam Benman-Fried bypassed the exchange’s management to take money from the exchange to fund unproductive trading activities with sister trading firm Alameda Research.
A key objective for UK regulators will be to bring the regulations guiding the industry on par with traditional financial players.
“We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and that includes crypto-asset technology,” Andrew Griffiths, the economic secretary to the Treasury, said in a statement. “But we must also protect consumers who adopt this new technology — ensuring strong, transparent and fair standards.”
While there is some uncertainty as to the number of UK FTX creditors, the stock market’s fall has injected a renewed sense of urgency into regulators whose core aim is now to protect the integrity of their financial markets, as well as the interests of consumers.
UK Crypto Regulation: Other Highlights
The proposed regulation of the UK crypto ecosystem will also include the publication of these products to the public. Regulators want advertisements for crypto projects to include certain disclosures that inform consumers of the risks involved in the project.
While the UK government is serious about introducing the new rules, if it becomes law, it will take several years to complete and implement its provisions.
“Having a regulatory roadmap or direction of travel would be particularly useful for the UK in terms of being a crypto hub,” Julian Sawyer, CEO of Standard Chartered-backed crypto custody services firm Zodia Custody.
Top industry leaders are advocating for futuristic crypto regulations and the call from stakeholders pushed the European Union to pass the Markets in Crypto Assets (MiCA) bill last year. Besides the UK and EU, US regulators are also working to put in place comprehensive multi-agency regulation following the executive order issued by President Joe Biden back in March 2022.
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Benjamin Godfrey is a blockchain enthusiast and journalist who delights in writing about the real-life applications of blockchain technology and innovations to drive mainstream acceptance and global integration of the emerging technology. His desires to educate people about cryptocurrency inspire his contributions to well-known blockchain-based media and websites. Benjamin Godfrey is a sports and farming enthusiast.
