The UK Treasury is finalising plans for a package of sweeping rules to regulate the cryptocurrency industry, according to The Financial Times. This will 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 going to be interesting to see how the UK approaches such a contentious asset class(es) and market space. Any attempts to create a perimeter to deter foreign companies selling to the UK are historically tough to enforce,” says Alex Viall, Director of Regulatory Intelligence, Global Relay. “The UK seems to want to encourage innovation and investment via fintech crypto activity to make it an appealing regulatory environment. The risk of a light regime is the potential for fraud and consumer loss. This cost might be too high bearing in mind some of the retail scandals suffered by main street investors in the last five years, especially during a recession and cost of living crunch.”
Crypto hub
The Treasury spoke in April of becoming a “crypto hub”. Then Chancellor of the Exchequer Rishi Sunak said that “effective regulation” would encourage “the businesses of tomorrow to invest, innovate and scale up on UK shores”.
The Financial Conduct Authority (FCA) has since announced a planned Consumer Duty to protect investors.
Opinion is divided among crypto enthusiasts about whether this type of regulation will legitimize and boost crypto, or whether it is in conflict with the core founding principles of crypto as a decentralized store of value and payment system.
“It would definitely go against the crypto decentralization narrative,” says Dennis Balbi, Release Coordinator, Global Relay. “If regulators enforce background checks, ID verifications, and ultimately hold your data (hence centralizations), this will be the antithesis of what crypto has promised for years.
“It will allow retail and institutional capital to flow into the market, so the advent of regulation will hit the market negatively at the beginning, but not in the medium long term.”
Dennis Balbi, Release Coordinator, Global Relay
FTX and its vocal former CEO Sam Bankman-Fried continue to attract significant media attention, fuelling speculation that the industry is in deep trouble.
“This will allow retail and institutional capital to flow into the market. Those digital assets like bitcoin that are more decentralized will likely get the approval of regulators. It will allow retail and institutional capital to flow into the market, so the advent of regulation will hit the market negatively at the beginning, but not in the medium-long term. This will force more coins to follow suit on the decentralization path,” says Balbi. “There is a lot of capital waiting to enter the market just off the back of that- Blackrock, JP Morgan etc want to capitalize on the bear market. They want to jump in because of the FTX collapse. Then there will be the first BTC ETF approval.”
Several other jurisdictions are mulling over regulatory measures, including the SEC in the US, and regulators in Europe, Singapore, and Dubai.