The United Kingdom (UK) has revealed plans to curb some unprotective and incautious business practices that have surfaced in the cryptocurrency industry over the past year and have heavily influenced the ruinous occurrences replete in the market.
On Tuesday, the British government initiated several policies to regulate crypto asset businesses in line with that of traditional financial firms. One of these is an initiation that would vitalize rules targeting financial intermediaries and custodians that keep crypto on behalf of clients.
A popular concern in 2022 was the increase of unprotected and reckless loans agreed upon between diverse crypto firms and a lack of due diligence exerted on the parties involved in those transactions.
The policies proposed by the British government seek to stop those activities by creating a “robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms,” according to a statement out late Tuesday.
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“We remain steadfast in our commitment to grow the economy and enable technological change and innovation — and this includes cryptoasset technology,” Andrew Griffith, economic secretary to the Treasury, said in a statement.
“But we must also protect consumers who are embracing this new technology — ensuring robust, transparent, and fair standards.”
The efforts of international regulators to control the regulatory-averse crypto industry have become more urgent with the bankruptcy of FTX. The European Union and the United States have already suggested strengthening consumer protections in cryptocurrency.
“Recent events in the crypto market underline the need for prompt, clear, and effective regulation,” Griffith stated in a speech on December 2.
BlockFi and Genesis Trading, two digital asset lending companies exposed to the crypto giant, went bankrupt due to FTX’s collapse, which is said to have utilized customer money to execute risky loans and trades.
More details on the policies proposed by the UK government
The policies discussed on Tuesday would also impose stricter transparency requirements on crypto exchanges to ensure they reveal important disclosure documents and layout comprehensible admission requirements for trading digital tokens.
Another plan would loosen stringent regulations on cryptocurrency advertising, enabling companies registered with the Financial Conduct Authority to run their campaigns until a more comprehensive crypto framework is implemented. The regulatory action coincides with the chill of a severe downturn known as “crypto winter” being felt by cryptocurrency firms in the UK and elsewhere.
After the collapse of FTX and a drop in cryptocurrency prices, investors are slashing company values, and multiple waves of layoffs have also afflicted the sector. The London-based cryptocurrency exchange Luno downsized 35% of its staff last week, affecting roughly 330 positions.
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It takes time to regulate. Before Parliament passes the proposals, it will probably take years. Parliament is still debating the Financial Services and Markets Bill, which would classify digital currency as a regulated good. The measure intends to increase the nation’s financial industry’s competitiveness after Brexit.
Nonetheless, according to some industry executives, even the simple display of being seen as taking action is important.
“Having a regulatory roadmap or regulatory direction of travel is going to be super useful for the UK in terms of being a crypto hub,” Julian Sawyer, CEO of Standard Chartered-backed crypto custody services firm Zodia Custody, told CNBC on Tuesday
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