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Crypto industry say UK consultation results may end ‘mishmash’ of policy initiatives

Crypto industry say UK consultation results may end ‘mishmash’ of policy initiatives
Member of Parliament Lisa Cameron told us she was hoping to see a crypto bill drafted and passed before the next general election. Credit: Rita Fortunato/DL News.
  • The result of the HM Treasury’s consultation on a comprehensive framework for regulating digital assets has been published.
  • Time is ticking to get UK regulation done before the 2024 election if it is to compete with MiCA.
  • Crypto champions say a new law may end the “mishmash” of policies haunting the industry.
  • However, that doesn’t mean there aren’t new rules for the industry to comply with already.

A version of this story appeared in our The Guidance newsletter. This version has been updated to reflect the fact that HM Treasury published the report on Monday. Sign up here.

Happy Monday, Joanna and Inbar here.

The UK crypto industry has been anxiously awaiting the release of a report summing up the conclusions of His Majesty’s Treasury on a holistic set of rules for crypto.

And now the report is finally out. The government published its final rules for crypto assets and stablecoins on Monday.

The report is the next step before lawmakers can draft a bill that will rival the European Union’s Markets in Crypto Assets regulation.

When HM Treasury launched the consultation on a tailored, comprehensive regime for crypto in February, the industry warmly welcomed the proposals.

The rules set guardrails for firms and lending platforms on consumer protection, prudential requirements, disclosures and market abuse.

And here’s no time to lose if the UK wants to compete with the EU’s MiCA.

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Back in June, Member of Parliament Lisa Cameron told us she was hoping to see a crypto bill drafted and passed before the next general elections, expected in the autumn of 2024.

That would help “harness a leadership position in this sector,” Cameron, who sits at the head of the crypto and digital assets all-parliamentary party group, reiterated to Westminster.

No more mishmash

Industry participants say that a tailored framework for crypto assets would provide clarity around what regulators expect of them.

They’re also hoping it will bring some cohesion to the regulatory landscape in the UK.

Since the Treasury proposals were published in February, UK authorities have pumped out a series of other rules and policy decisions.

Bittrex Global exchange CEO Oliver Linch told us it’s difficult to know how to approach the UK when there’s a “mishmash” of policy initiatives but not one unifying rulebook.

”In February, there’s this consultation paper that looks really positive. And then there’s a whole load of other stuff coming out in a kind of mishmash — central bank digital currencies over here, some stuff about tax coming out over there,” Linch said.

That’s a lot of regulatory change to get one’s head around, but it’s not enough to provide crypto firms with the clarity they want from a comprehensive framework.

”I can’t execute on a nice speech from the prime minister,” Linch said. “I can execute on actual rules telling me what I actually have to do. And until we get that, we’re in a state of limbo.”

Indeed, some of the laws that came into force this year have already scared off the market’s biggest players.

Crypto providers, including Binance, PayPal, and ByBit, have suspended services for UK customers in response to new rules on promotions, as Joanna reported.

The FCA started enforcing these rules, which expanded the UK’s strict financial advertising standards to cryptocurrencies, in early October.

Here are some of the other reg developments from 2023

In June, the Law Commission clarified how crypto should be treated as personal property.

That sounds obscure, perhaps, but it was groundbreaking — property rights are key to lots of legal relationships. So that was a big step toward providing a solid legal foundation for crypto.

In late August, the Financial Services and Markets Act came into force.

As we reported, the act set a new definition for crypto assets as financial assets. It also laid down rules for stablecoins, and introduced blockchain sandboxes for market participants to experiment with.

In September, the UK’s Travel Rule, a bid to combat money laundering, went into force. It requires UK-based crypto companies to share information about users’ transactions.

That’s a big deal for crypto, where pseudonymity is one of the main draws of the tech.

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