According to a recent consultation paper, the United Kingdom’s His Majesty’s Treasury intends to implement stringent rules for crypto assets. This comes after the failure of the cryptocurrency exchange FTX in 2022, which resulted in millions of individuals incurring losses of billions of dollars.
What the crypto regulations entail
The United Kingdom, on the 31st of January, kicked out a long-awaited and highly anticipated industry consultation with the goal of proposing a series of reforms that would bring the regulation of companies dealing in crypto assets into line with those of regular financial institutions.
A step that would reinforce restrictions aimed at financial intermediaries and custodians who hold cryptocurrency on behalf of customers was one of the recommendations that were brought forward.
According to the proposal, one of the most prominent trends that developed in 2022 was an increase in the number of dangerous loans issued between several crypto businesses, as well as a lack of due diligence being done on the counterparties engaged in such transactions.
In addition, it would crack down on activities of this nature, working toward establishing a robust regulatory framework that would strengthen the rules surrounding the lending of cryptocurrency while simultaneously improving both consumer protection and the operational resilience of businesses.
We remain steadfast in our commitment to grow the economy and enable technological change and innovation — and this includes cryptoasset technology.U.K. Treasury
The interesting thing is that, unlike in the conventional banking industry, organizations dealing in cryptocurrencies won’t be required to frequently publish their market data.
On the other hand, the exchanges would be obligated to store the data and ensure that it may be accessed at any time.
In contrast to several of its overseas peers, the Treasury Department has opted not to prohibit the use of algorithmic stablecoins. They will no longer be classified as stablecoins, but will instead be qualified as unbacked digital assets.
In spite of this, the marketing of algorithmic currencies should not use the phrase “stable” in any way if crypto ads are to be believed.
UK to launch the digital pound
Amidst it all, the country is moving forward with the launch of its digital pound. A public consultation on the characteristics of a digital pound is going to be held by the currency in the weeks to come after it is scheduled to do so.
As a means of coping with the widespread elimination of cash transactions, the United Kingdom is one of many nations investigating the feasibility of a CBDC.
The introduction of a digital pound would provide the nation with an advanced digital payments system that is capable of competing with the proliferation of digital assets and other types of payments used in the private sector.
On the other hand, the Bank of England (BoE), much like the majority of its counterparts, has not indicated that it plans to create or issue a digital currency. At this time, it is simply investigating whether or not a digital pound is possible, taking into account factors such as redeemability, security, and efficiency.
The individual who is selected for the job of Treasury will be responsible for managing the expanding CBDC team, conducting policy analysis on CBDC matters with the intention of providing advice to government ministers, and working closely with other local and global partners on the project.