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The UK is moving forward with plans to regulate the cryptocurrency industry, including stablecoins, in an effort to tighten oversight of the digital asset market.
The Treasury on Monday published its response to a consultation on the future of rules for the cryptocurrency industry. The talks come as the government seeks to attract digital token investment to London while strengthening investor protection.
A fiat-backed stablecoin is a type of cryptographic token that is pegged to an existing currency and can be used for digital payments.
Chancellor Rishi Sunak has championed the UK as a global crypto hub but faces growing tensions with the Financial Conduct Authority as the regulator seeks to tighten safeguards for consumers. .
Over the past year, there have been calls for stronger regulation following the high-profile collapse of exchange FTX, which resulted in huge financial losses for thousands of investors.
The Treasury said its proposal was in light of recent events “including the FTX fiasco” and that it plans to develop secondary legislation to address the new rules in early 2024.
Under the proposal, stablecoins would be regulated under the same framework as existing rules for traditional payment service providers, known as the Payment Services Regulation.
Tether’s USDT token, which is linked to the dollar, is the world’s largest stablecoin in circulation with a current market capitalization of $85 billion.
If stablecoins are issued from the UK, their issuance and custody will be regulated by the Financial Services and Markets Act.
“Certain stablecoins have the potential to foster consumer choice and efficiency and become a widespread means of retail payments,” the Treasury Department said.
The government also aims to broadly regulate the crypto industry, including custodians who hold crypto assets on behalf of investors, and mandate disclosure for all tokens listed on exchanges.
However, some financial regulation experts have expressed concerns about whether the new proposals are viable. “Cryptocurrency regulation is unlikely to be easily forced into existing regulatory frameworks. It will take time, money and consideration to figure out how to achieve this quickly,” said law firm Pinsent. said Masons partner Jonathan Cavill.
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He added that the rules are “likely to result in changes to the way the industry is structured and develops” and that “it is regulated and incredibly expensive and time-consuming to maintain regulation and compliance.” Ta.
The government said the cryptocurrency industry “should be commensurate with the risks and follow standards expected of existing similar financial services activities.”
He added that the regulations “will foster growth and innovation in this sector.” . . At the same time, it reduces financial stability risks and ensures consumer protection. ”
