Following the meltdown of crypto exchange FTX last year, that resulted in billions of dollars in losses for millions of investors, Britain’s finance ministry is planning “robust” regulations for crypto assets.
Globally, cryptocurrency is currently unregulated, with firms only required to conduct checks to prevent money laundering. However, the Financial Conduct Authority (FCA) of the United Kingdom has stated that more than 80% of license applicants were unable to demonstrate that they could do so properly because “dark money” flows through the sector.
According to Financial Services Minister Andrew Griffith in a statement on Tuesday, the draft rules, which will be published on Wednesday, will ensure robust, transparent, and fair standards, consistent with the approach to traditional finance.
“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 regulations come after increasing interest rates caused a wave of bankruptcies in the sector in 2022, wiping $1.4 trillion off the market’s value. The price of bitcoin, the most widely traded cryptocurrency, fell by 60%.
The market crash shook investor confidence in cryptocurrencies, but interest in the underlying technology, known as blockchain, for other applications such as payments remains.
The new plans will be subject to a three-month public consultation, followed by FCA proposals for detailed rules.
The ministry stated that its approach would mitigate the sector’s most significant risks.
“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.
Financial intermediaries, which facilitate transactions, and custodians, which store customer assets, will be subject to rules.
The collapse of FTX and other crypto exchanges led to a demand for industry regulation to conserve the investors. Regulators are currently focused on opening up “crypto conglomerates,” which merge activities such as trading, lending, and custody underneath one ceiling but lack traditional regulatory safeguards.
The European Union is already working on the finalization of its first set of crypto rules.
Firms already authorized by the FCA will be allowed to issue their own promotions while the new regulatory regime is implemented, according to the ministry.
(Adapted from USNews.com)