New regulations are set to affect crypto markets in the UK. To meet upcoming regulatory requirements and evolving regulatory expectations, cryptocurrency providers and traders need to adapt.
In the UK, cryptocurrency use is growing rapidly. Everyone can become part of this growing industry. Even if you do not know a single thing about crypto, it is never too late to learn. On sites such as https://cryptomeister.com/, you can discover the world of cryptocurrencies and blockchain, and learn how to buy, trade, and sell crypto with detailed guides. Knowing about the newest regulations is of extreme importance as well.
Recent volatility in cryptocurrency prices (with Bitcoin grabbing the headlines) and subsequent market failures highlight the dangers of unchecked crypto markets. Therefore, it is not surprising to see the UK taking steps to bridge that gap. The Financial Conduct Authority (the “FCA”) and the UK Government are creating new rules to make the UK more attractive as a hub for new technologies and everything digital.
Upcoming regulations
Two groups of reforms that are particularly important for cryptocurrencies stand out in the cacophony of changes:
Marketing by cryptocurrency platforms: HM Treasury is aiming to bring within the scope of UK regulation other more commonly used crypto assets, such as Bitcoin, as well as crypto assets that are already covered by existing regulatory perimeters (such as e-money tokens). However, non-fungible tokens (NFTs) are expected to remain largely unregulated. Thus, any marketing by cryptocurrency platforms of trading of in-scope crypto assets will require authorization from an authorized person (or fall within an exemption).
In addition, the FCA and HM Treasury are considering strengthening the rules for financial promotions by:
- Exemptions for high-net-worth individuals and sophisticated investors should be narrowed;
- The creation of a new gateway for authorized firms to approve financial promotions for unauthorized persons (e.g. cryptocurrency platforms);
- Adopting more robust rules for the approval of financial promotions (e.g., requiring competency, due diligence, and ongoing monitoring of approvers);
- Requiring authorized firms to strengthen their customer journey requirements (e.g., by limiting direct offers of certain mass market investments, which will in time also include qualified crypto assets, to retail customers).
Payments using stablecoins: By amending existing electronic money and payments legislation, HM Treasury intends to bring certain stablecoins used for payments into the UK’s regulatory perimeter following industry consultation. This will in effect require FCA authorization for stablecoin issuers, stablecoin custodial wallet providers, and stablecoin exchanges.
Further, the UK Government plans to regulate systemically important stablecoin-based payment systems and how regulation should deal with systemic stablecoin and their operator’s failures. No mention is made of the relationship between the proposed new regimes and banks wishing to issue their stablecoins. Further consultations are anticipated concerning tokenization of assets and distributed ledger technology in financial market infrastructure, including developing a sandbox for testing DLT solutions.
