UK Government Faces Industry Backlash Over Proposed Crypto Regulations

Key Points:

• UK crypto stakeholders welcome proposed legislation, seek global collaboration to avoid post-Brexit isolation.
• Global industry titans submit feedback on UK’s proposed strategy for crypto sector.
• UK plans to regulate crypto under existing financial services frameworks, publish crypto-specific rules in the next 12 months.

The UK’s proposed legislation for the cryptocurrency industry has been largely welcomed by stakeholders.

However, experts are urging the country to collaborate with regulators globally to avoid post-Brexit isolation. They are particularly concerned in the wake of the European Union’s Markets in Crypto Assets (MiCA) regulation. The regulatory clarity for crypto assets in the UK is a welcome step towards accelerating the adoption of socially beneficial innovation while reducing criminal and financial risks. Riccardo Tordera Ricchi, head of policy at UK-based The Payments Association, believes that these frameworks should be thoughtfully applied.

Countries around the world have been looking to construct rules for the burgeoning crypto sector, and with MiCA in its final stages, the pressure is mounting for countries to decide on their own approach. The UK wants to bring crypto into the scope of its existing regulatory frameworks rather than creating an entirely new set of rules for the crypto space like MiCA. With the consultation period closed on April 30, global industry titans have submitted their views, and the UK government may publish crypto-specific rules in the next 12 months.

The plan is to regulate crypto under the Financial Services Markets Act and have an authorization regime for digital asset companies. The UK government also hopes to regulate stablecoins under the country’s payment rules and set up a market abuse regime to protect investors. The Financial Services and Markets Bill, which will give regulators the power to oversee crypto by extending rules for financial instruments, is already making its way through parliament.

Although the “same risk, same regulatory outcome” approach is supported by the lobby group CryptoUK, some experts believe that the regulatory point of view is a hard thing to tackle. Meiran Shtibel, associate general counsel at US-based Fireblocks, noted that it is based on financial activity, which is different from MiCA’s asset-based approach. However, Changpeng Zhao, CEO of Binance, believes that the government’s approach is solving for the desired outcome rather than applying generic rules. He tweeted recently that this approach captures the intricacies of novel innovations and their unique benefits and risks.

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