UK ends plans to regulate ‘wild west’ crypto sector

The Treasury is finalizing plans for a sweeping package of rules to regulate the cryptocurrency industry, including limits on foreign companies trading in the UK, provisions to deal with company collapse and restrictions on product advertising.

Ministers will soon launch a consultation on the new regulatory regime, after the implosion of the FTX put new urgency on the government’s promise to impose order on the “wild west” of finance.

Prime Minister Rishi Sunak said in April, while still chancellor, that “effective regulation” would help make Britain a global hub for crypto-asset technology and encourage “tomorrow’s businesses to invest, innovate and scale on UK shores”.

The Financial Conduct Authority began inspecting UK crypto firms’ money laundering controls this year, but lacks wider powers to protect consumers in areas such as mis-selling, false advertising, fraud and mismanagement.

The new powers will allow the FCA to oversee crypto more broadly, including monitoring how companies operate and advertise their products, three people familiar with the Treasury’s thinking said.

They added that there would be restrictions on overseas sales in the UK market and that the proposals would set out how crypto companies could be dissolved.

The powers will form part of the Financial Services and Markets Bill, a wide-ranging piece of legislation moving through parliament. It was a bill that maintains the UK’s post-Brexit approach to financial regulation changed to include cryptocurrency futures provisions at the end of October.

The government’s desire to turn the UK into a global hub has come under heavy scrutiny in the intervening months as the crypto industry has been mired in crisis after crisis.

Cities Minister Andrew Griffith insisted last week that those ambitions had not changed despite the recent disasters. “Yes, there are questions about the future of crypto, but we would be foolish to ignore the potential of the underlying technology,” he said at an event in Edinburgh.

He said the financial services bill would set up a regulatory framework for cryptoassets and stablecoins, and that the government would “consult on the rest of the world’s market-leading cryptoasset regime later this year”. Stablecoins are cryptoassets whose value is tied to a highly liquid traditional asset such as the US dollar or the UK pound.

“The UK is committed to creating a regulatory environment for businesses to innovate, while maintaining financial stability and regulatory standards so that people and businesses can use new technologies reliably and safely,” a Treasury spokesman told the Financial Times.

“The government has already taken steps to bring some crypto-asset activities within the scope of UK regulation, and will consult on proposals for a wider regulatory regime.” It was launched by the UK consultation At the beginning of 2021 regarding crypto regulation, it was mostly focused on stablecoins.

Some in the government believe the timetable for launching the inquiry could slip to early 2023 due to “rapid developments” in the crypto industry.

FCA chief executive Nikhil Rathi told the FT’s banking summit last week that his agency was already being “proactive” in areas where it did not yet have jurisdiction, including publicly warning about the “risks of investing in crypto, the possibility of losing all your money”. “.

He added that 85 percent of companies that applied to join the regulator’s crypto registry failed the FCA’s anti-money laundering tests.

A cross-party Treasury select committee is in the middle of an inquiry into the impact of cryptocurrency on the UK. On Wednesday, he will ask experts from the FCA and the Bank of England about its risks, the case for regulation and the pros and cons of central bank-issued cryptocurrency, known as CBDC.

The commission will hear from an investigative journalist how much football fans have lost through crypto tokens endorsed by high-profile players and clubs.

The FCA and the BoE declined to comment.

Additional reporting by Owen Walker

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