UK Announces Crypto Regulation Proposal | Akin Gump Strauss Hauer & Feld LLP
The UK government has announced that it plans to regulate crypto under its existing financial services regime. Under the proposals, crypto would be subject to the UK Financial Services and Markets Act 2000 and under the remit of the UK Financial Conduct Authority, and the existing market abuse regime for financial instruments would apply.
The United Kingdom (UK) aims to keep pace with the wave of regulation expected to occur in the European Union (EU) following the European Council’s approval of the Markets in Crypto-Assets Regulation, or “MiCA”.
The government released a consultation note on 1 February 2023 on its proposals, which aim to strike a balance between addressing potential consumer and stability risks and creating a financial environment in which crypto-active service providers can operate, innovate and grow.
The proposals build on existing government proposals, which focused on stablecoins and the financial promotion of cryptoassets, and will seek to regulate cryptoasset activities “in accordance with [the government’s] approach to traditional finance’ on the basis of ‘same risk, same regulatory outcome’.
The legislative basis for regulating the marketing activities of crypto-active and stable coins (which is the first phase of the government’s efforts, given their likely wide use) is the Financial Services and Markets Bill (the “Bill”). The Bill (currently going through the House of Lords) envisages that rather than producing significant new legislation, the Government will use the existing financial services framework to bring the regulation of stablecoins and promotions into the remit of Financial Services and Markets Act. 2000 and under the mandate of the Financial Conduct Authority.
The second intended phase of the government’s efforts is to regulate a wider range of crypto-asset activities (such as trading, investment or custody) that are considered high-risk and high-opportunity. The government also intends to introduce a market abuse regime for crypto assets which will be based on the existing market abuse regime for financial instruments. Similarly, the government is consulting on its proposal to regulate crypto-asset lending platforms, including by maintaining clear contractual terms of ownership, risk warnings to customers and adequate financial resources.
The UK government is demonstrating its appetite for the UK to grow into a global hub for crypto-asset technology, while seeking to protect consumers and ensure a stable sector within which to operate. It follows the wave of regulation expected to occur in the EU following the European Council’s approval of MiCA (see our article ‘EU Regulation Aims To Bring Confidence To Crypto Market’ – a link to the full article can be found here. )
The consultation closes on 30 April 2023 and interested parties can submit their responses to [email protected].
