Britain’s finance ministry plans “robust” regulations for crypto assets, following the collapse of crypto exchange FTX last year, which left millions of people nursing billions of dollars in losses.
Crypto is currently unregulated globally, with firms only having to carry out checks to prevent money laundering. However, Britain’s Financial Conduct Authority (FCA) has said that more than 80 percent of license applicants were unable to show they could do this properly as “dark money” flows through the sector.
The draft rules, to be published on Wednesday, would ensure robust, transparent, and fair standards, consistent with the approach to traditional finance, Financial Services Minister Andrew Griffith said in a statement on Tuesday.
“We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes cryptoasset technology,” Griffith said.
The new rules come after rising interest rates led to a string of bankruptcies in the sector in 2022, wiping $1.4 trillion (roughly Rs. 11.5 crores) off the value of the crypto market. The price of Bitcoin, the most widely traded coin, plunged 60 percent.
The market rout shook confidence in cryptocurrencies, though interest in the underlying technology, most commonly known as blockchain, for other uses like payments remains.
There will be a three-month public consultation on the new plans, followed by proposals for detailed rules from the FCA.
The ministry said its approach would mitigate the most significant risks in the sector.
“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,” the ministry said.
There will be rules for financial intermediaries, which facilitate transactions, and custodians, which store customer assets.
The failure of FTX and other exchanges triggered calls for regulation of the industry to protect investors. Regulators are focusing on prising open “crypto conglomerates” which combine activities like trading, lending and custody under one roof, but with traditional regulatory safeguards between them absent.
The European Union is already finalising its first set of crypto rules.
Firms already authorised by the FCA would be temporarily allowed to issue their own promotions, while the new regulatory regime is being introduced, the ministry said.
© Thomson Reuters 2023