UK lays foundation for robust crypto regulation

According to recent reports, the United Kingdom’s His Majesty’s Treasury plans to implement stringent rules for crypto assets.

2022’s dire events that took down several entities have left governments worldwide in dire need of effective crypto regulations. The United Kingdom has spearheaded what analysts term one of the most robust crypto regulation frameworks in existence.

What the crypto regulations entail

The currently published proposals for crypto-asset regulation go hand in hand with U.K.’s ultimate crypto goal. Last year, Rishi Sunak, the current U.K. prime minister, said he would use his position to establish the Kingdom as a global hub for crypto-asset technology.

The Treasury points out that it will give crypto a chance to benefit from the “confidence, credibility and regulatory clarity” of the existing system for financial systems set out by the U.K.’s Financial Services and Markets Act 2000 (FSMA).

According to reports, The U.K. financial watchdogs intend to create a level playing field for centralized and decentralized financial markets. In addition, the regulation offers traditional and emerging financial markets a chance at the “same risk, same regulatory outcome.”

Regulators have acknowledged the possibility that the regulations would not benefit everyone. For example, this applies when some crypto corporations would choose to continue their operations outside of Britain.

U.K. financial watchdogs intend to curb the repeat of the 2022 crypto market. The Treasury focuses on investor protection and holding centralized crypto entities accountable. Unlike traditional financial entities, the FCA won’t require decentralized financial entities to publish their market data frequently.

Exchanges should store operational data and ensure that regulators can access it at any time. Unlike other nations working on crypto regulation, the Treasury Department has opted not to ban the use of algorithmic stablecoins. 

However, the U.K. financial regulators will not classify these coins as stablecoins. Instead, they will classify them as unbanked digital assets. Nevertheless, the crypto winter has raised the validity of global crypto regulations, and Britain is here to make it happen.

Crypto entities get ready for regulations

According to reports, the E.U.’s Market in Crypto-Assets (MiCA) legislation is advancing toward becoming law. On that note, local crypto companies are getting ready for the change. The new crypto regulations will be the law for all 27 E.U. member countries.

Under the legislation, crypto entities must inform the public about their real-time token pricing process and trading volumes. Additionally, these entities must settle all trades on the same day those trades happen. 

Moreover, crypto exchanges must separate their funds, including crypto, and funds belonging to their clients. The regulation also explicitly prohibits insider trading. Moreover, once the E.U. passes MiCA, crypto entities will have 18 months to adapt. 

In the meantime, some entities have laid out operational grounds in the U.K. For example, as per recent reports, Crypto.com announced that it received approval from the U.K.’s Financial Conduct Authority and registered as a crypto asset service provider in the U.K. 

Additionally, the Crypto trading app Revolut won registration from FCA to offer crypto services in the U.K. after a lengthy wait.

Moreover, in August 2022, Revolut acquired operation authority to provide its services across the European Economic Area. The win was through registration with the Cyprus Securities and Exchange Commission.

U.K. crypto markets open for global expansion

Amid the need for crypto regulations, the United Kingdom has created a suitable environment for crypto entities to thrive. Several crypto entities have won operational approval in the country. Toward the end of last year, the FCA approved MoonPay operations within its borders.  

The registration came months after MoonPay relied on temporary permission to operate its crypto business. Through the approval, MoonPay joined 39 other crypto entities with permanent registration by the U.K. watchdog.

Earlier on, more than 100 firms had applied for application approval with FCA. However, after the U.K. regulator rejected or withdrew their applications, many pulled out and sought European Union approval instead.

With U.K.’s newfound focus on investor protection, fraud schemes could reduce, or these culprits face heavy legal repercussions. For example, in December 2022, U.K.’s High Court ordered several crypto exchanges to hand over the personal data of some of their users after the FCA discovered a fraud case. 

The crypto community registered the move as a sign that the U.K. judiciary is willing to assist crypto fraud victims. However, there remains a split between regulators. According to some, the United Kingdom’s financial arms should regulate crypto and the DeFi markets.

However, others argue that regulating the crypto industry will legitimize the existence of decentralized finance. 

Jon Cunliffe, a deputy governor at the Bank of England, warned that crypto needs robust regulation to protect financial stability. Jon said that the experiences of 2022 demonstrated the volatility of the crypto industry.