The UK is poised to introduce its first crypto regulations, requiring market players to obtain authorisation before servicing consumers. Despite cryptoassets being a small part of the global financial framework, the rebound of bitcoin post the FTX exchange’s crash has raised concerns about its ties to traditional finance and consumer risks.
Earlier, the EU initiated the world’s first comprehensive cryptoasset-specific rules, drawing crypto firms eager for regulatory clarity. The UK’s finance ministry has decided to follow suit, requiring crypto-related firms to seek authorisation from the Financial Conduct Authority.
The proposed rules, influenced by the FTX incident, will focus on cryptoassets like bitcoin and the underlying blockchain technology, recognised for its potential uses, such as securities settlement. The government insists that firms dealing with UK retail consumers must be authorised, irrespective of their location.
The rules will cover various aspects of the crypto market, including offering a cryptoasset, operating a trading platform, crypto-to-currency conversions, organising crypto investments, lending, and custody. These rules will be integrated into market law, rather than forming a separate regime.
Jonathan Cavill, a lawyer at Pinsent Masons, warns, “The UK runs the risk of being left behind if it fails to attract crypto businesses.“ This move is significant for the UK, underlining the need to balance innovation encouragement and consumer protection in the fast-growing crypto sector.
