The UK government has set out plans to monitor activity in the cryptocurrency market and has promised to “robustly regulate cryptoasset activities” in the wake of volatility.
“Cryptoassets – commonly known as ‘crypto’ – are a relatively new, diverse and constantly evolving class of assets that have a range of potential benefits, as well as posing risks to the consumer,” the Treasury said.
“As is common in emerging technology markets, the crypto sector continues to experience high levels of volatility and a number of recent failures have exposed the structural vulnerability of some business models in the sector.
“Our robust approach to regulation mitigates the most significant risks, while harnessing the advantages of crypto technologies. This enables a new and exciting sector to safely flourish and grow, boosting jobs and investment.”
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The UK government said it will seek to regulate a “broad suite of cryptoasset activities” like it does with traditional financial instruments.
“These proposals will place responsibility on crypto trading venues for defining the detailed content requirements for admission and disclosure documents – ensuring crypto exchanges have fair and robust standards,” it said.
“The proposals will also strengthen the rules around financial intermediaries and custodians – which have responsibility for facilitating transactions and safely storing customer assets.
“These steps will help to deliver a robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms. As part of this approach, the consultation will seek views on improving market integrity and consumer protection by setting out a proposed crypto market abuse regime.”
CryptoUK, the UK’s trade body for the crypto industry, is pleased that the government has acknowledged that the proposals could amount to an “effective ban” on cryptoasset financial promotions, and that the exemption is “a huge step in the right direction”.
Ian Taylor, board advisor at CryptoUK, says: “We will continue to work with regulators, including HMT, the Financial Conduct Authority and the Advertising Standards Agency to ensure that the UK has robust yet fair standards for the promotion of digital assets.”
Meanwhile, Bradley Duke, co-CEO at the crypto exchange-traded product provider ETC Group, says a company operating in crypto and behaving like a bank or a broker, should naturally be regulated to help boost investor confidence in the sector.
“As always, any regulation should be sensible and measured – we don’t want to kill the incredible innovation that comes with crypto – but we do want to see regulatory oversight in areas that matter, including segregation of assets and capital adequacy rules.”