UK Unveils Crypto Asset Regulatory Framework, Aims To Become Crypto Innovation HubNovember 17, 2023
The United Kingdom’s Treasury (HMT) has unveiled a comprehensive regulatory framework for crypto assets, underscoring the nation’s steadfast dedication to embracing blockchain and crypto innovation.
In a Monday statement, the HMT noted that its decisive stance on crypto asset regulation aligns with its vision to foster innovation and development in the blockchain sector.
“The government has confirmed its final proposals for cryptoasset regulation in the UK, including its intention to bring a number of cryptoasset activities into the regulatory perimeter for financial services for the first time,” it wrote.
The regulatory framework, first introduced on 1 February 2023 to “allow for consultations on the future financial services regulatory regime for cryptoassets”, addresses several key aspects of the industry, providing much-needed clarity.
Notably, it excludes airdrops from the token issuance regulatory perimeter, recognizing that they do not constitute a public offering. This move is set to ease concerns within the crypto community and promotes a more favorable environment for innovation.
Furthermore, the framework clarifies that non-fungible tokens (NFTs) are considered out of scope for regulation. In-game purchases and sales of digital items, integral to the world of NFTs, fall under non-financial services activity, exempting them from excessive regulation.
However, the HMT’s decentralized finance (DeFi) approach is one of caution and consideration. While acknowledging the potential importance of DeFi in financial services, the government intends to avoid banning it, emphasizing its innovation-forward approach. This stance allows DeFi projects to develop within a regulated framework, promoting responsible growth in this sector.
Importantly, the UK government “strongly rejected” the notion of treating crypto trading as gambling or enforcing an outright ban on cryptocurrencies, stating that such an approach would counter globally agreed regulatory efforts and stifle crypto-based innovation.
That said, the latest move underscores the UK’s ambition to provide a fertile ground for cryptoasset businesses to thrive. With the Financial Services and Markets Act now passed, this regulatory framework sets the stage for the UK to attract international talent, investment, and innovation, positioning the country as a frontrunner in the evolving crypto landscape.
Meanwhile, as the UK forges ahead with its crypto regulations, its counterpart, the United States, continues to grapple with a more sluggish approach. The Biden administration has struggled to enact comprehensive crypto regulation, which has left the industry in a state of uncertainty. However, Ron Hammond, Director of Government Relations at Blockchain Association, suggests that there is a chance that regulations might be fast-tracked before the 2024 election.
“Elections tend to turn policy issues hyper-partisan as each candidate tries to cast their opponent’s position on a certain topic as flawed… With bills touching issues like stablecoin regulation, market structure, taxes, and accounting standards in play, time is short.” He tweeted Monday.
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