Cryptocurrency – Additional Regulation for the Under-regulated
The UK is setting out its stall as a leading hub for all things crypto. However, consumers have struggled to place their confidence in digital assets (and thus businesses linked with them) given the distinct lack of regulation from the authorities as well as the volatility that is inherent with a decentralised asset. At present, roughly 40 related crypto businesses have licences with the FCA, and the only controls the regulator has for any other crypto-related business and/or activity is via anti-money laundering and ‘Know Your Customer’ checks.
In order to overcome this difficulty and to make digital assets more attractive, the UK proposes to introduce new regulatory oversight for crypto-related businesses which will extend much further than they presently do. The legislators are also seeking to amend the Financial Services and Markets Act 2000, through the Financial Services and Markets Bill, by adding (amongst other things) “cryptoassets” within the list of ‘specified investments’ in Part III of the Regulated Activities Order (RAO).
While it might be premature to talk about the specifics, the Bill is presently (as at 9 June 2023) in the House of Lords at the report stage (Financial Services and Markets Bill – Parliamentary Bills – UK Parliament). Once agreed in parliament, and once Royal Assent is obtained, the FCA will be engaged to confirm and comment on the regulatory oversight they are able to provide. While we are still waiting to see what the final impact of the Bill will be, one thing is for certain: this is a big step in the right direction and demonstrates the UK’s commitment to attract both customers and other businesses to further engage with digital assets here in the UK.