UK Government Turns Its Sight to Crypto Following Recent Proposal

The UK government is taking a closer look into regulating crypto. According to a recent release from His Majesty’s Revenue and Customs (HMRC), the tax agency is also looking for better proposals to regulate the burgeoning crypto industry.

Dynamic Crypto Regulation the Main Target

The United Kingdom (UK) is currently ramping up its interest in the crypto space. According to a recent consultation paper, the Treasury seeks proposals from key industry players and experts to position itself as a major crypto hub.

The 82-page document zooms in on several critical topics relating to algorithmic stablecoins and non-fungible tokens. The document stresses a dynamic regulatory framework that does not harm or hurt the nascent cryptocurrency ecosystem while deterring illicit activities. According to the UK tax body, all crypto-related activities should undergo the same regulatory oversight as other financial landscapes.

Furthermore, the Treasury emphasizes that there won’t be a separate regulatory sector for crypto assets as it would rather fall under the UK’s Financial Services and Markets Act 2000 (FSMA) framework. The major goal of this crypto regulation framework is to level the digital field between cryptocurrencies and traditional finances by avoiding hardline control over strategic measures that have grown exponentially amid the crypto winter. 

It is worth noting that the UK government proposed crypto measures were fueled by the recent development of the digital market as well as advent events such as the failure of FTX due to mismanagement of investors’ assets which led to its bankruptcy. This market event reinforced the case for an effective regulatory framework and sector engagement in crypto. 

Furthermore, the major government stance on crypto assets and all other activities underlining their use should always follow the required standards expected of other similar financial services activities and make known the risks they pose while exploiting potential benefits and opportunities of the technology behind them. 

In essence, having such a regulatory framework in place will further stimulate the growth and innovation of the cryptocurrency industry by enabling responsible actors and regulatory certainty, and pitched confidence to participate in various crypto markets, as well as giving all types of investors and traders the confidence to invest in the UK for the longer term. 

Cryptocurrency enthusiasts believe the published consultation will mark the next but not the final phase of the government’s stance to regulate cryptocurrencies and deliver on its commitment to set out vast proposals for the financial services regulation of crypto assets trading and investment activities. In doing so, the UK government is constantly seeking opinions from many market players and participants globally. 

The consultation will officially close on April 30, 2023. Until then, the government welcomes ideas from reputable stakeholders, financial institutions, trade associations, crypto firms, representative bodies, consumer groups, and legal firms. 

Will Crypto Regulations Stunt the Growth of Financial Sovereignty? 

According to a report published by the Global Legal Research Directorate (GLRD) of the Law Library of Congress, 51 countries have banned the crypto industry and its vast markets. It remains whether the UK will join this list due to its recently published cryptocurrency framework aimed at regulating the entire industry. 

The government’s regulation of cryptocurrency is controversial, but experts say UK traders and investors should welcome it as it could mean more stability in a notoriously volatile market. 

The new regulations have the potential to protect long-term investors, prevent fraudulent activities within the vast growing cryptocurrency ecosystem, and provide guidance to be followed by financial companies keen on innovating the cryptocurrency economy. However, it remains unknown whether the published framework will be accepted as it has yet to strike a balance.