Britain sets out plans to regulate crypto industry in wake of FTX collapse

The UK has formally launched plans to regulate the cryptocurrency industry, with the government seeking to curb some of the reckless business practices that have emerged over the past year and contributed to its crash. The end of FTX.

At the widely anticipated industry talks that started on Tuesday, the government has proposed a number of measures aimed at bringing the regulation of cryptocurrency businesses in line with that of traditional financial firms.

Among the proposals announced on Tuesday was a move to tighten rules targeting financial intermediaries and custodians who store cryptocurrencies on behalf of their customers.

A major theme that emerged in 2022 was the rise in risky lending between multiple cryptocurrency companies and the lack of due diligence on the counterparties involved in those transactions.

According to a statement released late Tuesday, the UK’s proposal would crack down on such activity and “strengthen consumer protection and operational resilience of businesses, while providing a powerful world-first to tighten rules on cryptocurrency lending.” We aim to establish a system.

Treasury Secretary Andrew Griffiths said in a statement: “We remain steadfast in our commitment to growing the economy and enabling technological change and innovation, including cryptocurrency technology.

“But we also need to protect consumers adopting this new technology and ensure robust, transparent and fair standards.”

The collapse of FTX has added urgency to global regulators’ attempts to govern the regulation-hating crypto space. Already done.

“Recent events in the cryptocurrency market underscore the need for timely, clear and effective regulation,” Griffiths said in a December 2 speech.

of FTX Implosionsparked a bankruptcy chain reaction of digital asset lending firms exposed to the crypto giant for allegedly using customers’ money to make risky loans and transactions. block phi and digital currency group genesis trading.

The proposal, which was announced on Tuesday, imposes stricter transparency requirements on cryptocurrency exchanges to ensure that they publish relevant disclosure documents and set clear approval requirements for digital token trading. It also imposes on

Another measure would be to relax strict rules on cryptocurrency advertising, allowing companies registered with the Financial Conduct Authority to issue their own promotions while a broader cryptocurrency regime is put in place. .

The regulatory move comes at a time when crypto companies in the UK and abroad are feeling the chill of a deep recession known as “crypto winter”.

While companies have seen their valuations slashed by investors after the explosion of FTX and the slump in cryptocurrency prices, the industry is also plagued by numerous layoffs. Last week, London-based cryptocurrency exchange Luno reduce workforce by 35% It’s a move that affects over 330 roles.

Regulation takes time. It will likely be several years before the measure is approved by Congress. The Financial Services and Markets Bill that recognizes crypto-assets as regulated products is still passing Congress. The law aims to make the country’s financial sector more competitive after Brexit.

Nonetheless, according to some industry executives, even the simple display of appearing to take action is important.

Julian Sawyer, CEO of Zodia Custody, a cryptocurrency custody services firm backed by Standard Chartered, said in an interview with CNBC on Tuesday, “Having a regulatory roadmap and direction for regulation is important for the UK. will be very useful in terms of becoming a hub for cryptocurrencies.” .

Sawyer, who previously co-founded UK fintech firm Sterling and led the international expansion of crypto exchange Gemini, said he wanted to ensure “general alignment between global markets regarding their approach to digital assets.” also said to be important.

He noted that the European Union is ahead of the game in the market for cryptocurrency legislation, which is expected to come into force in 2024.

Bitcoin, which has quietly risen about 40% since the beginning of 2023, was trading flat at $23,103 on Wednesday.

Rishi Sunak, who took over as UK leader in October 2022, was criticized by market players. crypto-friendly prime ministerhe previously said he had “decided” to make the UK “a jurisdiction of choice for crypto and blockchain technology.”

As London seeks to compete with the EU financial hub after Brexit, cryptocurrencies could be a way to increase its chances, industry insiders have previously said.

“To achieve our mission of providing clarity to the industry and encouraging businesses to invest, innovate and create jobs in the UK, Jordan Wayne, UK Public Policy Officer at Chainalysis, said: We have an opportunity to enable the industry to play its part.” he told CNBC in November.

The Snack administration plans to discuss plans to introduce a new set of rules tailored to cryptocurrency companies, with the goal of completing talks by April 30, after which more detailed rules will be developed.

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