The UK government's proposed regulatory regime for cryptoassets is a significant development, and it is important to understand what it means for businesses and individuals. The government published a call for evidence on 1st February 2023 and closed this on 30th April 2023. They received around 131 responses which profiled below.
So what does this all mean for me?
For Businesses
- The government's proposals will require cryptoasset businesses to obtain authorisation from the Financial Conduct Authority (FCA) for certain activities, such as operating a centralised cryptoasset exchange or providing cryptoasset custody and lending services. This will involve meeting the FCA's standards for consumer protection and financial stability.
- A cryptoasset exchange that is currently operating without authorisation from the FCA will need to apply for authorisation under the new regime. If the exchange is granted authorisation, it will be subject to the FCA's regulations, such as the requirement to have adequate systems and controls in place to protect customer assets.
- A cryptoasset lending firm that is currently offering its services to UK residents will need to obtain authorisation from the FCA under the new regime. If the firm is granted authorisation, it will be subject to the FCA's regulations, such as the requirement to provide clear and accurate information to customers about the risks involved in borrowing cryptoassets.
- The government's proposals also include new rules for financial promotions of cryptoassets. All financial promotions of cryptoassets must be approved by an authorised person, unless an exemption is available.
- These new regulations will impose additional costs and compliance burdens on cryptoasset businesses. However, they are also likely to lead to increased trust and confidence in the cryptoasset market, which could attract more customers and investors.
For Individuals
The government's proposals will provide greater protection for consumers when dealing with cryptoasset businesses. The FCA will be responsible for overseeing the cryptoasset sector and ensuring that businesses comply with the regulations. This will help to reduce the risk of fraud and market manipulation, and give consumers more confidence in the cryptoasset market.
Specifically, the government's proposals include the following measures to protect consumers:
- Cryptoasset businesses will be required to have adequate systems and controls in place to protect customer assets.
- Cryptoasset businesses will be required to provide clear and accurate information to customers about the risks involved in investing in cryptoassets.
- Cryptoasset businesses will be prohibited from engaging in misleading or deceptive marketing practices.
- An individual who wants to invest in cryptoassets will need to be more careful about the businesses they deal with under the new regime. Individuals should only invest in cryptoassets through businesses that are authorised by the FCA.
Overall, the UK government's proposed regulatory regime for cryptoassets is a positive development. It will help to protect consumers and promote the responsible development of the cryptoasset market. Although the proposals are still in their early stages, and it is likely to be some time before they all come into force, businesses and individuals should start preparing for the new regime now.
If you have any questions or concerns on the right jurisdiction for your crypto business the Myna team are on hand to help! Get in touch here.
