The UK Government has introduced proposals to integrate cryptoassets into the regulatory framework governing traditional financial services. In April, the government committed to establishing rules aimed at making the UK a global hub for cryptoasset technology.
The consultation proposals focus on enhancing regulations for crypto trading platforms and creating a “robust world-first” approach to crypto lending. This includes tightening rules around financial intermediaries and custodians. Key design features proposed in the consultation address prudential requirements, data reporting, consumer protection, location policy, and operational resilience.
Additionally, the document outlines regulations touching on various cross-cutting issues across cryptoasset activities and business models, including market abuse, cryptoasset issuance, and disclosures.
The launch of this consultation comes at a time when the crypto sector faces significant volatility and recent failures have revealed vulnerabilities in certain business models. The Government aims to gather feedback on improving market integrity and consumer protection through a proposed crypto market abuse regime.
Economic Secretary to the Treasury, Andrew Griffith, emphasized the government’s commitment to fostering economic growth and technological innovation, which includes advancements in cryptoasset technology. He also highlighted the importance of consumer protection, stating the need for robust, transparent, and fair standards.
As a preliminary measure, the government plans to regulate the promotion of cryptoassets under financial promotions legislation, aligning it with the same standards as those for stocks, shares, and insurance products. The document states that this approach aims to foster innovation, enhance consumer protection, and ensure that cryptoasset promotions adhere to the same standards as financial services with comparable risk profiles.
The consultation period will close on April 30, and the feedback received will inform the legislative process. Following the introduction of legislation, the Financial Conduct Authority will consult on detailed regulations for the sector.