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The Treasury is finalizing plans for a comprehensive package of rules to regulate the cryptocurrency industry, including limits on foreign companies selling in the UK, how to deal with the collapse of companies and restrictions on product advertising.
Ministers will soon begin consultations on a new regulatory regime after FTX’s implosion injected fresh urgency into the government’s promise to impose order on the “wild west” of finance.
Prime Minister Rishi Sunak said in April, while chancellor, that “effective regulation” would help make Britain a global hub for cryptoasset technology and encourage “tomorrow’s businesses to invest, innovate and scale on UK shores”.
The Financial Conduct Authority began monitoring money-laundering controls at UK-based crypto firms this year but lacks broader powers to protect consumers in areas such as mis-selling, false advertising, fraud and mismanagement.
The new powers would give the FCA more comprehensive oversight of crypto, including monitoring how companies operate and advertise their products, said three people familiar with the Treasury’s thinking.
They added that there would be restrictions on selling into the UK market from abroad and the proposals would set out how crypto companies could be brought down.
The powers will be part of the Financial Services and Markets Bill, a wider piece of legislation moving through Parliament. The bill, which underpins the UK’s post-Brexit approach to financial regulation, was amended in late October to include future provisions for cryptocurrencies.
The government’s ambition to make the UK a global hub has come into sharp focus in the intervening months as the crypto industry has been mired in crisis after crisis.
City minister Andrew Griffith insisted last week that those ambitions remain despite recent disasters. “Yes, there are questions about the future of crypto – but we will ignore the potential of the underlying technology,” he said at an event in Edinburgh.
He said the Financial Services Bill would establish a framework for regulating cryptoassets and stablecoins, and that the government would “consult on a world-leading regime for the rest of the cryptoasset market later this year”. Stablecoins are cryptoassets whose value is linked to highly liquid traditional assets such as the US dollar or the UK pound.
“The UK is committed to creating a regulatory environment in which companies can innovate, while crucially maintaining financial stability and regulatory standards so that people and businesses can use new technologies reliably and securely,” a Treasury spokesperson told the Financial Times. told the Financial Times.
“The government has already taken steps to bring certain cryptoasset activities within the scope of UK regulation – and will consult on proposals for a wider regulatory regime.” The UK launched a consultation on crypto regulation in early 2021 that focused largely on stablecoins.
Some government insiders believe that the timetable for starting the consultation could slip to early 2023 due to “fast-moving events” in the crypto industry.
FCA chief executive Nikhil Rathi told the FT’s Banking Summit last week that his agency is already “proactive” in areas where it does not yet have powers, including “publicly warning about the risks of investing in crypto, the possibility of losing all your money.” .”
He added that 85 percent of companies that applied to join the regulator’s crypto register did not pass the FCA’s anti-money laundering tests.
The cross-party Treasury Select Committee is in the middle of its inquiry into the influence of cryptocurrencies in the UK. On Wednesday he will quiz experts from the FCA and the Bank of England about its risks, the case for regulation and the pros and cons of central bank-issued cryptocurrencies known as CBDCs.
The committee will also hear from an investigative journalist how many football fans have lost out to crypto tokens backed by high-profile players and clubs.
The FCA and BoE declined to comment.
Additional reporting by Owen Walker
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