The first UK crypto regulation to set ‘robust’ standards

LONDON, Jan 31 (Reuters) – Britain’s Treasury is planning “tough” regulations for crypto assets, following the collapse of crypto exchange FTX last year, which left millions nursing billions of dollars in losses.

Crypto is currently unregulated globally, and companies only have to carry out checks to prevent money laundering. However, the UK’s Financial Conduct Authority (FCA) said more than 80% of license applicants could not show they could do it properly as “dark money” flows through the sector.

The draft rules, to be published on Wednesday, will ensure strong, 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 growing the economy and enabling technological change and innovation – and that includes crypto-asset technology,” Griffith said.

The new rules come after rising interest rates led to a series of bankruptcies in the sector in 2022, wiping $1.4 trillion from the value of the crypto market. The price of bitcoin, which is the most traded, fell 60%.

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The market collapse has shaken confidence in cryptocurrencies, although interest in the underlying technology, commonly known as blockchain, for other uses such as payments remains.

There will be a three-month public consultation on the new plans, followed by proposals for detailed FCA rules.

The ministry said its approach will mitigate the most significant risks in the sector.

“These proposals will place responsibility on crypto trading venues to define detailed requirements for the content of access and publication documents – ensuring that crypto exchanges have fair and robust standards,” the ministry said.

There will be rules for financial intermediaries, who facilitate transactions, and custodians, who store client assets.

The failure of FTX and other exchanges has sparked calls for industry regulation to protect investors. Regulators are focusing on encouraging open “crypto conglomerates” that combine activities like trading, lending and custody under one roof, but without traditional regulatory safeguards between them.

The European Union is already finalizing its first set of crypto rules.

Firms already authorized by the FCA will be temporarily allowed to issue their own promotions while the new regulatory regime is introduced, the ministry said.

Reporting by Huw Jones; Edited by Sharon Singleton

Our Standards: The Thomson Reuters Trust Principles.

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