UK’s Treasury is reportedly finalising sweeping new powers for Financial Conduct Authority to properly regulate the cryptocurrency industry
The UK is reportedly finalising plans for a package of sweeping rules to regulate the troubled cryptocurrency industry.
According to a report in the Financial Times, the plans being drawn up by HM Treasury include limits on foreign companies selling into the UK, provisions for how to deal with the collapse of companies, and restrictions on the advertising of products.
It is fair to say that the crypto industry is a fairly troubled sector at the moment. The price of Bitcoin, the most popular digital currency by far, is down more than 70 percent from a 2021 peak.
Matters have not been helped by the spectacular collapse last month of the FTX cryptocurrency exchange.
Soon after that cryptocurrency lender BlockFi filed for Chapter 11 bankruptcy protection, saying it had been hurt by exposure to the FTX collapse.
BlockFi’s bankruptcy filing came after two of BlockFi’s largest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July, citing extreme market conditions that had led to losses at both companies.
In May the sudden collapse of popular stablecoin TerraUSD cost investors tens of billions of dollars, and led to a series of insolvencies that erased nearly $600 billion (£525bn) in wealth.
Now according to the FT, British ministers will shortly launch a consultation on the new regulatory regime.
Current UK Prime Minister Rishi Sunak said in April this year, while he was still chancellor, that “effective regulation” would help make Britain a global hub for cryptoasset technology and would encourage “the businesses of tomorrow to invest, innovate and scale up on UK shores”, the FT noted.
Meanwhile the Financial Conduct Authority this year also reportedly began inspecting the money-laundering controls of UK-based crypto companies.
However the FCA lacks the powers to protect consumers in areas such as mis-selling, false advertising, fraud and mismanagement.
The new British regime will fix this, and the new powers will enable the FCA to oversee crypto more broadly, including monitoring how companies operate and advertise their products, three people familiar with the Treasury’s thinking told the Financial Times.
They added there would be restrictions on selling into the UK market from overseas and that the proposals would set out how crypto companies could be wound down.
Financial services and markets bill
According to the FT, the new powers will be part of the financial services and markets bill, a wide-ranging piece of legislation that is going through parliament. The bill was reportedly amended in late October to include future provisions for cryptocurrency.
“The UK is committed to creating a regulatory environment in which firms can innovate, while crucially maintaining financial stability and regulatory standards so that people and businesses can use new technologies both reliably and safely,” a Treasury spokesperson told the Financial Times.
“The government has already taken steps to bring certain cryptoasset activities into the scope of UK regulation — and will consult on proposals for a broader regulatory regime.”
The UK launched a consultation on crypto regulation in early 2021 that was mostly focused on stablecoins.
The Bank of England in April 2021 had set up a taskforce to look at the case for a new “Britcoin”, or central bank-backed digital currency.
Some government insiders believe the timetable for launching the consultation could slip into early 2023 because of “fast-moving events” in the crypto industry, the FT reported.
In September this year, US Biden administration released an initial framework for future regulation of cryptocurrencies and other digital assets, to minimise their potential risks while encouraging private sector innovation and international co-operation.