UK Sets Out Plans To Regulate The Crypto Industry
Great Britain has officially announced plans to regulate the crypto industry, which is very important for the crypto market. The government has been trying to stop some bad business practices that have caused FTX’s downfall in the past year.
The government launched a consultation on Tuesday to regulate crypto asset businesses like traditional financial firms.
On Tuesday, the government announced several plans to make it harder for financial services companies and custodians to hold cryptocurrencies for clients.
In 2022, the rise of risky loans made between multiple crypto firms was a key theme. Contractors involved in these transactions didn’t get the same level of scrutiny as regular contractors.
The UK’s proposals would restrict such activity and aim to “establish the world’s first robust regime that enhances lending to crypto-assets.” It will also strengthen consumer protection and firms’ operational resilience. The fall of FTX has made regulators’ efforts to regulate the crypto space more urgent. The US and EU have proposed making it easier for consumers to protect themselves in crypto.
FTX, which used client money for risky loans and trades, caused a chain reaction of digital asset lending firms, Genesis and BlockFi going bankrupt.
Tuesday’s plan will also enforce stricter transparency requirements on crypto exchanges to publish proper disclosure documents and clear requirements for digital token trading.
What else can be done
Another step is to ease strict rules on crypto ads, allowing Financial Conduct Authority-registered bodies to market their shares before introducing a wider crypto regime.
The regulator comes as crypto firms in the UK and abroad are experiencing a deep downturn known as ‘crypto winter.’
Investors have taken a hit because of the FTX explosion and falling crypto prices. Hence, many companies had to lay people off. Last week, Luno, a London-based crypto exchange, cut 37% of its workforce across more than 340 roles.
Adjustment takes time. It is likely to take many years before Parliament approves the measures. The Financial Services and Markets Bill would make crypto-assets regulated products. Some industry executives say even a simple sign of acceptance is important.