The UK government has announced its plans to regulate the cryptocurrency sector, aiming to foster innovation and protect consumers and investors from potential risks. The plans, which were published in a consultation paper on 7 November 2023, outline the government’s vision for a “proportionate and effective” regulatory framework that balances the benefits and challenges of crypto assets.
According to the paper, the government intends to:
Apply the existing anti-money laundering and counter-terrorist financing rules to crypto asset service providers, such as exchanges, wallets and custodians, in line with the recommendations of the Financial Action Task Force (FATF).
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Introduce a new category of regulated crypto assets, called “stable tokens”, which are pegged to fiat currencies or other assets and are used for payments or investment purposes. Stable tokens will be subject to similar rules as electronic money or payment services, depending on their functionality and risk profile.
Establish a “regulatory sandbox” for crypto asset innovation, where firms can test new products and services in a controlled environment with regulatory guidance and feedback.
Enhance consumer awareness and education on crypto assets, including the risks and opportunities they present, as well as their legal and tax implications.
Work with international partners and standard-setting bodies to promote global coordination and alignment on crypto asset regulation.
The government stated that it recognizes the potential of crypto assets to transform the financial sector and the wider economy, by enabling faster, cheaper and more inclusive access to financial services, as well as supporting innovation and competition. However, it also acknowledged that crypto assets pose significant challenges, such as volatility, cybercrime, fraud, market abuse, consumer harm and environmental impact.
The consultation paper is open for feedback from stakeholders until 31 January 2024. The government expects to publish its final policy proposals and draft legislation in the second half of 2024.
The UK’s approach to crypto asset regulation is broadly in line with other major jurisdictions, such as the US, EU and Japan, which have also taken steps to clarify and update their rules in response to the rapid growth and evolution of the sector. The UK’s plans also reflect the recommendations of the Crypto assets Taskforce, which was established in 2018 by the Treasury, the Bank of England and the Financial Conduct Authority (FCA) to assess the opportunities and risks of crypto assets and develop an appropriate policy response.
Bank of England proposes allowing stablecoins as a payment option for goods and services.
The Bank of England has recently published a discussion paper on the role of stablecoins in the UK’s payment system. Stablecoins are digital tokens that are backed by assets or liabilities, such as fiat currency or commodities, and aim to maintain a stable value over time.
Stablecoins have the potential to offer some benefits for consumers and businesses, such as lower costs, faster transactions, and greater financial inclusion. However, they also pose significant risks and challenges, such as operational resilience, consumer protection, and regulatory compliance.
The Bank of England proposes that stablecoins that are used as a means of payment should meet the same standards as those that apply to traditional payment systems and services. This means that stablecoins should be authorized and supervised by the relevant authorities, have adequate governance and risk management frameworks, and ensure the safety and availability of the funds backing the tokens.
The Bank of England also suggests that stablecoins should be interoperable with other payment systems and services and support the use of the pound sterling as the UK’s official currency.
The Bank of England invites feedback from stakeholders on its proposals and analysis by 7 February 2022. The Bank of England will use the responses to inform its future policy development and engagement with other regulators and international bodies. The Bank of England aims to ensure that the UK’s payment system remains safe, efficient, and innovative, while supporting the public interest and financial stability.
Senator Cynthia Lummis wants Crypto Regulation Bill passed early next year in the USA
Senator Cynthia Lummis, a vocal advocate for Bitcoin and cryptocurrency, has expressed her hope that a comprehensive crypto regulation bill will be passed by Congress in early 2024. In an interview with CoinDesk, she said that she is working with other lawmakers and regulators to create a clear and consistent framework for the crypto industry in the US.
Lummis, who is a member of the Senate Banking Committee, said that she wants to ensure that the US does not stifle innovation and competitiveness in the crypto space. She said that she is in favor of a light-touch approach that balances consumer protection and financial inclusion. She also said that she is opposed to any attempts to ban or restrict crypto assets, such as the proposed Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act.
Lummis, who owns Bitcoin herself, said that she sees crypto as a way to diversify her portfolio and hedge against inflation. She said that she believes that Bitcoin is a store of value and a digital gold, and that other crypto assets have different use cases and benefits. She said that she wants to educate her colleagues and the public about the potential of crypto and blockchain technology.
Lummis also commented on the recent infrastructure bill that contained a controversial provision on crypto tax reporting. She said that she was disappointed that the amendment to clarify the definition of a broker was not adopted, but that she is optimistic that the issue will be resolved in the future. She said that she is working with other senators, such as Ron Wyden and Pat Toomey, to introduce a standalone bill to address the crypto tax issue.
Lummis said that she is confident that the US will eventually adopt a sensible and supportive crypto regulation framework, but that it will take time and effort. She said that she is committed to advancing the crypto agenda in Congress and to collaborating with other stakeholders in the industry. She said that she hopes that by early 2024, there will be a crypto regulation bill that will provide clarity and certainty for the crypto community in the US.
SEC is overreacting on crypto,” – US Senator. Cynthia Lummis
In a recent interview with CNBC, US Senator Cynthia Lummis expressed her frustration with the Securities and Exchange Commission (SEC) and its approach to regulating cryptocurrencies. She argued that the SEC is overstepping its authority and stifling innovation in the crypto space.
Lummis, who is a vocal supporter of Bitcoin and blockchain technology, said that the SEC should not treat all cryptocurrencies as securities, but rather recognize the differences between various types of digital assets. She said that the SEC should focus on protecting investors from fraud and manipulation, but not interfere with the development of new products and services that use crypto.
She also criticized the SEC for its lack of clarity and guidance on crypto regulation, saying that it creates uncertainty and confusion for both investors and entrepreneurs. She said that the SEC should work with Congress and other regulators to create a clear and consistent framework for crypto regulation, rather than acting unilaterally and arbitrarily.
Lummis said that she is working with other lawmakers to introduce legislation that would provide more clarity and certainty for the crypto industry. She said that she hopes to educate her colleagues and the public about the benefits and potential of crypto, and to foster a more positive and supportive environment for innovation.
She concluded by saying that she believes that crypto is the future of finance, and that the US should embrace it rather than fear it. She said that she is optimistic that crypto will bring more financial inclusion, freedom, and prosperity to millions of people around the world.