Announced in early December, the UK has agreed on introducing a sweeping set of new rules to regulate the cryptocurrency industry. The new rules will place limits on advertising crypto products, provisions for dealing with the collapse of companies, and finally limiting foreign companies selling into the UK.
Unsurprisingly, these new regulation announcements come off the back of the FTS implosion, which has been making front-page headlines for many weeks now. As mentioned on this page, the FTX collapse has created more caution than there already was around crypto assets.
Prime Minister Rishi Sunak believes that these changes will attract businesses to the UK. The FCA was already making anti-money laundering efforts on UK-based crypto companies, but this did nothing to fight false advertising and mismanagement – particularly from overseas.
Under the new regulations, which are known as Markets in Crypto-Assets (MiCA), the FCA will now have greater power to oversee crypto activity, particularly when it comes to advertising and operations.
Of course, these efforts to make the UK a crypto hub has been under the spotlight given that the industry is enduring many crises recently. Some will argue that the UK shouldn’t be encouraging crypto activity, whilst some concede that it’s inevitable and must be better regulated.
A Treasury spokesperson told the Financial Times, “The UK is committed to creating a regulatory environment in which firms can innovate, while crucially maintaining financial stability and regulatory standards so that people and businesses can use new technologies both reliably and safely.”
There’s currently no official timeline of when these regulations will be implemented, but time is of the essence, with the shadow of the next crypto exchange scandal looming. They are expected to be brought in some time during 2023.
Sentiment over the new regulations
Crypto enthusiasts appear to be somewhat split over the new regulations. Some believe that crypto, because it is decentralized by nature, should have minimal interference from governing bodies. This isn’t surprising given that blockchain and the crypto world has a lot of roots in libertarianism – it’s a way of having unregulated currency.
However, those that are less political about crypto are seeing the new measures as a good thing; it’s a way of bringing more security and credibility to the crypto world. After all, financial regulation exists for good reason in principle.
Furthermore, it’s important to remember that the UK government is not fighting against decentralized blockchain technology – it’s mostly focused on regulating the exchanges that buy, sell, and broker the coins. If crypto assets are as credible as any other, it’s difficult to argue that crypto exchanges should be let off the hook.
Whilst the newly proposed MiCA law seeks to protect consumers and investors, there may also be an element of wanting to tighten up unscrupulous political activity too. For example, crypto offers an alternative when it comes to sanctioning Russia, like the removal from SWIFT. Arm dealings and other illegal activity can also be conducted through crypto, which is more reason to have better oversight of the market.