Treasury reveals ‘world-first’ proposals to regulate cryptocurrency
The consultation comes amid a turbulent period for cryptocurrency markets, with confidence among investors at a low ebb following the sudden collapse of major exchange FTX and the falling value of Bitcoin, among other challenges.
By Tom Acres, technology reporter
Tuesday 31 January 2023 22:46, UK
A representation of cryptocurrency Binance is seen in this illustration taken August 6, 2021. REUTERS/Dado Ruvic/Illustration
Why you can trust Sky News
The Treasury has revealed proposals to regulate cryptocurrency, following widespread calls for action after the spectacular collapse of one of the world’s largest trading exchanges.
Promising a “robust” approach to digital assets consistent with traditional finance, the government says it wants exchanges to have fairer and tighter standards.
Sponsored link
Recommended byWhat is Outbrain
State of Survival PC
Under the plans, crypto platforms would become responsible for defining the demands that a currency must meet before being admitted for trading.
Exchanges will also be held accountable for safely facilitating transactions and keeping customer assets safe.
It comes after the deputy governor of the Bank of England told Sky News that crypto trading is “too dangerous” to remain outside mainstream regulation.
Speaking in light of the sudden bankruptcy of crypto platform FTX, Sir Jon Cunliffe described the market as “incredibly volatile” and said investors needed more protection.
Some 80,000 UK-based customers were impacted by the collapse of the world’s second-largest crypto exchange, with one British investor left with a £1m hole in his finances.
MORE ON CRYPTOCURRENCIES
FILE PHOTO: Representations of cryptocurrencies are seen in front of displayed FTX logo and decreasing stock graph in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
British investor who lost £1m in FTX collapse among 13 people to make fraud reports to police
People watch as the logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York
Coinbase cuts 20% of global workforce amid crypto collapse
Gillian Keegan's Twitter account appears to have been hacked
Gillian Keegan’s Twitter account changes picture to Elon Musk and promotes crypto in apparent hack
Related Topics:
Cryptocurrencies
FTX’s disgraced founder, Sam Bankman-Fried, has since pleaded not guilty to stealing billions of dollars in customer money.
Sir Jon Cunliffe, the Bank of England's deputy governor for financial stability, was speaking to Sky New's Paul Kelso.0:45
Play Video – ‘Regulate crypto before systemic problem’
‘Regulate crypto before systemic problem’
Are the government’s plans sufficient?
The proposals – which Labour said had arrived too far too late – come as the crypto industry seeks to regain the confidence of spooked investors.
Since FTX collapsed, wider market turmoil has seen Bitcoin, the world’s biggest token, fall to a five-month low and major exchange Coinbase cut 20% of its workforce.
Less than a year ago, Rishi Sunak, then chancellor, said he wanted the UK to be a “global crypto asset hub”.
Andrew Griffith, economic secretary to the Treasury, said the government was still committed to enabling crypto, but stressed the need to “protect consumers who are embracing this new technology”.
The plans will first be submitted to a consultation, but the Treasury claims the regulation will be a “world first”, suggesting it should arrive before the EU’s expected crypto legislation in 2024.
In the meantime, the Treasury announced it would be introducing a time-limited exemption to let more crypto asset companies issue promotions following a crackdown on “misleading” adverts.
Firms that are registered with the Financial Conduct Authority for anti-money laundering purposes will be allowed to while the broader regulation is being introduced.
Paul Kelso1:14
Play Video – What is the main aim of cryptocurrency?
What is the main aim of cryptocurrency?
‘We’ve been waiting a long time’
Crypto fraud expert Louise Abbott, a partner at Keystone Law, welcomed the proposals.
She told Sky News that the lack of regulation in crypto made it “hugely attractive to fraudsters”.
“We have been waiting in this industry for a long time,” she said.
“I deal with fraud and have seen a dramatic increase in crypto scams and fraud in the past 10 years. Last year, I was getting daily enquiries from potential victims who have been defrauded through a crypto scam.”
Ms Abbot hopes the regulation could be in place as soon as the summer, adding that it was in the interests of both exchanges and investors for greater oversight of the market.
Major industry players including Binance chief Changpeng Zhao, who saw his platform banned in the UK in 2021, and Coinbase’s Brian Armstrong have previously welcomed the prospect of more regulation.
“Unless we become a safer environment, investors will not invest in the way we have seen,” Ms Abbot added.
Varun Paul, former head of fintech at the Bank of England, now of crypto infrastructure provider Fireblocks, also described the plans as a “positive step”.
He told Sky News that industry turmoil meant there was a need for “clear rules”, and expressed hope that the UK’s regulation would do the job while still encouraging innovation.
