The United Kingdom has unveiled plans to regulate the activities and reckless business practices that have emerged in the cryptocurrency industry over the last year. This comes after the collapse of the crypto firm, FTX.
These activities have greatly influenced the market’s catastrophic events.
The British government announced various regulations on Tuesday to regulate crypto asset enterprises in the same way that regular financial corporations are regulated. One of these is an initiative to strengthen rules aimed at financial intermediaries and custodians who hold crypto on behalf of clients.
A common source of concern in 2022 was the rise of unprotected and reckless loans agreed upon between various crypto businesses, as well as a lack of due diligence on the parties engaged in those transactions.
“We remain steadfast in our commitment to grow the economy and enable technological change and innovation — and this includes cryptoasset technology,” Andrew Griffith, economic secretary to the Treasury, said in a statement
“But we must also protect consumers who are embracing this new technology, ensuring robust, transparent, and fair standards.”
The laws proposed by the British government seek to stop those actions by creating a “robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms,” according to a statement published late Tuesday.
With the bankruptcy of FTX, worldwide regulators’ efforts to control the regulatory-averse crypto business have become more pressing. The European Union and the United States have already urged that consumer protections in bitcoin be strengthened.
BlockFi and Genesis Trading, two digital asset lending companies that were exposed to the crypto giant, went bankrupt as a result of FTX’s failure, which is claimed to have used customer funds to make dangerous loans and transactions.
The measures considered on Tuesday would also impose tougher transparency standards on crypto exchanges to guarantee that important disclosure papers are disclosed and that admission conditions for trading digital tokens are laid out in an understandable manner.
Another proposal would relax severe regulations on cryptocurrency advertising, allowing organizations registered with the Financial Conduct Authority to undertake advertisements until a more comprehensive crypto framework is put in place.
The regulatory action comes with the chill of a severe downturn dubbed “crypto winter,” which cryptocurrency firms in the UK and abroad are feeling.
Investors are lowering firm values following the collapse of FTX and a decline in cryptocurrency prices, and the sector has also been hit by several rounds of layoffs.
Luno, a cryptocurrency exchange based in London, laid off 35% of its employees last week, affecting approximately 330 people.
However, regulation takes time. It will most likely take years for Parliament to pass the plans. The Financial Services and Markets Bill, which would classify digital assets, is still being debated in Parliament.
“Having a regulatory roadmap or regulatory direction of travel is going to be super useful for the UK in terms of being a crypto hub,” CEO of Standard Chartered-backed crypto custody services firm Zodia Custody, Julian Sawyer told CNBC on Tuesday