The government has revealed plans to strongly regulate the cryptocurrency industry to give customers confidence and promote growth in the sector. A consultation will be launched on the proposals, focusing on ensuring customers receive their assets back if a crypto firm fails, implementing rules for fair and clear crypto-asset promotions, enhancing data-reporting requirements, and imposing new regulations to stop the pump and dump schemes.
The Treasury says these measures will balance crypto technologies’ potential risks and benefits. According to the Economic Secretary to the Treasury, the government is dedicated to fostering economic growth and innovation, including in the crypto-asset sector, while also protecting consumers.
Even during the peak of the cryptocurrency market in 2021, there were strong calls for regulation. After the turmoil of 2022, the demand for regulation has become overwhelming. The market suffered massive losses, and many companies and individuals went bankrupt due to multiple scandals. The UK’s plan to put forth regulatory proposals will likely be welcomed by consumers who have been affected financially. However, the consultation process is expected to be intense as various groups weigh in on controlling the often unpredictable crypto market.
Part of the allure of cryptocurrencies was their independence from traditional financial systems. The implementation of government control may frustrate some hardline supporters. However, others believe that the right regulation could help the industry flourish. The former Chancellor, Rishi Sunak, had previously expressed his desire to make the UK a leader in crypto-asset technology.
However, the global crypto industry has faced numerous challenges, including the recent collapse of the FTX exchange, which has been described as one of the largest financial frauds in US history. The value of crypto assets has also plummeted, with Bitcoin’s value now less than half of its record high of over $67,000.
The prolonged decline in the cryptocurrency market referred to as the “crypto winter,” has led to questions about the feasibility of effectively regulating the industry.
Conservative MP Harriet Baldwin, who chairs the Finance Committee, has stated that she has witnessed “real Wild West behavior” in the industry but also acknowledges that valuable technological advancements are taking place that could benefit the UK economy. She closely monitors regulators’ plans and wants to ensure that consumers do not consider cryptocurrencies less risky just because they are regulated.
Jason Guthrie, head of product at global wealth management firm Wisdom Tree, believes that the crypto sector has a bright future. He welcomes regulators investigating the industry and believes getting the regulation right will benefit the industry and customers. He emphasized the importance of a strong regulatory framework with enforcement capabilities to build consumer confidence. He said that the sooner the details of specific proposals are released, the easier it will be to plan and prepare for them.
Open for business
Jeremy Barnett, a lawyer, and professor of algorithmic regulation at University College London believes that the UK is missing out on potential business opportunities in the crypto industry due to a lack of proper regulation. He stated that the UK should be a hub for crypto services and products, but only if it is properly regulated and monitored.
The government’s consultation on crypto regulation will end on April 30, after which ministers will consider all responses before creating legislation to be presented in Parliament. The responsibility of implementing detailed rules for the sector will fall to the Financial Conduct Authority as the regulator.