UK Govt announces details on proposals to regulate crypto

The proposals call for new responsibilities for crypto trading venues, and new rules for intermediaries and custodians.

February 1st, 2023 - The UK Government is aiming to regulate a broad range of cryptoasset activities, in line with how traditional finance is currently regulated.

The topic was debated in Westminster on the 25th January, and a consultation was launched today seeking views on improving market integrity and consumer protection by setting out a proposed crypto market abuse regime. 

Key proposed measures

The proposals deal with a broad range of cryptoasset activities, including exchange activities, custody activities and lending activities, which the government is intending to bring into the regulatory perimeter for financial services. For each activity the consultation sets out key design features of the regime covering themes such as prudential requirements, data reporting, consumer protection, location policy and operational resilience.

A key measure in the proposals is that crypto trading venues will be asked to take responsibility for defining the detailed content requirements for admission and disclosure documents, with a view to ensuring crypto exchanges have fair and robust standards.

Financial intermediaries and custodians, who take responsibility for facilitating transactions and storing customer assets, will also have to abide by new rules, with the aim of enhancing both consumer protection and the firms’ operational resilience.

The consultation paper also proposes regimes for a range of cross-cutting issues which apply across cryptoasset activities and business models, including market abuse and cryptoasset issuance and disclosures.

A time-limited exemption has been introduced to address industry concerns about FCA-authorised cryptoasset firms who can issue their own promotions. Cryptoasset business that are FCA registered for AML purposes will be allowed to issue their own promotions while the broader cryptoasset regulatory regime is being introduced.

The context of the proposals

Today’s announcement follows on from the package of measures introduced in April 2022 in response to the January 2021 consultation on cryptoassets, which introduced plans to regulate stablecoins and to encourage development of the cryptoasset market in the UK.

The proposals aim to deliver on the original policy intention of these measure - to promote innovation, enhance consumer protection and ensure that cryptoasset promotions can be held to equivalent standards as promotions of financial services products with similar risk profiles.

Economic Secretary to the Treasury, Andrew Griffith said:

“We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes cryptoasset technology. But we must also protect consumers who are embracing this new technology - ensuring robust, transparent, and fair standards.”

What will happen next

The Government’s consultation on the measure closes to new responses on the 30th April 2023, at which point the Government will begin work on its consultation response. Following this, the FCA will consult on its detailed rules for the sector.