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The UK is moving forward with plans to regulate the crypto industry, starting with stablecoins, to strengthen oversight of the digital asset market.
The Treasury published its response on Monday to a consultation on the future of crypto industry rules, as the government seeks to strengthen protections for investors while attracting investment in digital tokens to London.
Fiat-backed stablecoins are a type of crypto tokens that are pegged to an existing currency and can be used for digital payments.
Prime Minister Rishi Sunak has championed Britain as a global crypto hub but is facing increasing tensions with the Financial Conduct Authority as the regulator seeks to strengthen protections for consumers.
Over the past year, demand for stricter regulation has increased after well-known exchange FTX collapsed, resulting in huge financial losses for thousands of investors.
The Treasury said its proposals are based on recent events “including the failure of FTX” and that it plans to establish secondary legislation for the new rules in early 2024.
Under the proposals, stablecoins will be regulated under the same umbrella as existing rules for traditional payment service providers, known as the Payment Services Regulations.
Tether’s USDT token, pegged to the dollar, is the world’s largest circulating stablecoin with a current market cap of $85 billion.
The issuance and custody of stablecoins is subject to the regulatory framework of the Financial Services and Markets Act in cases where the coin is issued from the United Kingdom.
“Certain stablecoins have the potential to become a widely used retail payment method and increase consumer choice and efficiency,” the Treasury Department said.
The government is also trying to regulate the entire crypto industry, including custodians that hold crypto assets on behalf of investors, and requiring exchanges to disclose all tokens they list.
However, some financial regulation experts have expressed concerns about whether the new proposals are feasible. “It is unlikely that crypto regulation can be easily integrated into the existing regulatory framework. Time, money and thought needs to be spent on how to achieve this quickly,” said Jonathan Cavill, partner at law firm Pinsent Masons.
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He added that the rules would “likely bring about a change in the way the industry is structured and developed,” adding that “regulation and maintaining regulation and compliance is incredibly expensive and time-consuming.”
The crypto industry “should follow the standards expected of similar existing financial services activities, commensurate with the risks involved,” the government said.
It added that the regulations will “stimulate growth and innovation in the industry.” . . At the same time, risks to financial stability are reduced and consumer protection is ensured.”
Source : www.ft.com