On Wednesday, the Finance Ministry in Britain set out their first set of rules for regulating crypto assets.
It said that the downfall of the FTX crypto exchange and the ongoing turbulence had highlighted risks in the crypto space that need to be addressed.
Cryptocurrencies, such as bitcoin, are not directly regulated globally, but FTX’s collapse in the previous year has pushed regulators to take a closer look, as it resulted in losses worth billions of dollars for investors.
The Finance Minister
There were also investors in Britain who suffered due to the turmoil in the crypto sector, due to which regulators have turned their attention to it.
Andrew Griffith, the Financial Services Minister, said that the events that had occurred in the crypto space had made it clear that timely and effective regulation was needed for the industry.
They have developed a set of proposals for regulating the crypto sector that has been put forward for public consultation.
Griffith said that it included a regulatory framework that would apply to centralized crypto exchanges and would also apply to other crypto-related activities, such as crypto lending and custody services.
The new rules that have been developed by the Finance Ministry would apply to custody, operating a trading platform, signing up on a crypto-related trading platform, arranging deals, mining transactions, executing remittances or payment transactions, making a public offer, and running a node on a blockchain.
They will apply to all crypto companies that are based in Britain or are offering their services in the United Kingdom.
Companies would have to comply with liquidity and minimum capital requirements in order to obtain a license for operation.
The Financial Conduct Authority (FCA) would have the authority to decide if the physical presence of a foreign operator would be required in the UK, or not.
Experts said that the proposals put forward by the finance ministry were a move towards developing crypto regulation in the UK, as it is clear that regulation is coming to the crypto sector.
The existing rules only require crypto companies to show that they are compliant with anti-money laundering policies, but this has not stopped illicit activities from happening.
On Wednesday, the biggest crypto exchange in the world, Binance, said that it welcomed the proposals for public consultation, as it had been in favor of appropriate and effective regulation to ensure the adoption of digital assets in the mainstream.
According to surveys, almost 5% to 10% of adults in the UK own cryptocurrencies, which marks an increase of almost 100% in the last couple of years.
The finance ministry disclosed that institutional investor participation in the crypto sector is also growing.
There had been a dramatic decline in the sector in the previous year, as the global market cap had fallen below the $1 trillion mark, after hitting a peak of $3 trillion.
In January 2021, a consultation for stablecoin regulation had already been introduced in Britain, but they have now decided to expand it to include the entire crypto sector.