The UK government has announced plans to regulate the cryptocurrency industry. This comes after a series of problems in the market and calls for consumer protection. The Treasury announced this week that regulations would govern the creation, lending, and trading of digital tokens known as cryptocurrencies. The government wants to ensure retail investor’s money is safe if something goes wrong with a crypto exchange. The government also wants to ensure that the cryptocurrency market is fair and open to everyone.
Cryptocurrency companies must register to operate with the Financial Conduct Authority (FCA). Some businesses have signed up to stop money laundering, so they can advertise their services until all the rules are in place. Crypto UK, representing the cryptocurrency industry, has said that the government’s good plans will help protect consumers.
The regulations will be introduced in stages, starting with stablecoins later this year. These digital tokens are pegged to a specific value, usually that of a traditional currency like the US dollar. The regulations covering broader activities, such as trading, will be introduced soon. The FCA has also been asked to consider what future protections should be made available under the Financial Services Compensation Scheme.
Louise Abbott, a lawyer specialising in cryptocurrency fraud, welcomed the government’s plans. She said the proposals are a step in the right direction, but it will be a couple of years before they are implemented. Ms Abbott also noted that the regulations will make it more difficult to operate a cryptocurrency business but retail investors will benefit from greater transparency and improved safeguarding measures.
The recent problems in the cryptocurrency market have led to calls for regulation. Several exchanges and lenders, including Celsius Network, FTX, and Voyager Digital, have run into trouble. This has dented confidence in cryptocurrencies and accelerated calls for regulation. The anonymity of cryptocurrencies has been attractive to users, but the government’s plans to track transactions will help balance consumer protection.
Nimesh Shah, the CEO of the accounting firm Blick Rothenberg, said that the regulations would increase the barrier to entry for retail investors. He said that exchanges would have to pay fees that would be passed on to investors, which would act as a deterrent. Mr Shah also said that the choice of exchanges will be limited and that some people may decide that investing in cryptocurrencies is no longer a good idea.
The UK government’s plans to regulate the cryptocurrency industry are a response to recent problems in the market and calls for consumer protection. The rules will make it harder to run a cryptocurrency business, but they will clarify things and give retail investors more protection. The rules will be established in stages, starting with stablecoins later this year. Soon after, the authorities will cover a wider range of activities, like trading. The FCA has also been asked to consider what future protections should be made available under the Financial Services Compensation Scheme.
