The UK finally reveals plan to regulate crypto trading and lending

Muhammad Naeem

Blogger

The financial regulator of the UK, the Financial Conduct Authority (FCA), has repeatedly issued warnings regarding cryptocurrency risks faced by investors. It states that investors' funds are at risk & they may lose everything. Crypto trading is largely unregulated in the UK & there are zero compensation arrangements established.

The cryptocurrency market is currently in a bullish trend, with a total market cap that has already surpassed $1 trillion.

Regulation in place to bring cryptocurrency into the mainstream:

On 1st February, the UK issued Regulations regarding Cryptocurrency. The UK government yesterday laid out its proposal to control and regulate the crypto market. The crypto arrangement will align the sector regulations with the principles of conventional financial products. The aim is to “give clarity and confidence” to consumers & businesses. In the consultation schemes, where the Treasury is getting the views of stakeholders until the April end, the government would: • Secure investors’ money when a cryptocurrency business shuts down. • Ensure cryptocurrency promotions are fair and transparent & don’t deceive • Establish and enhance the requirements of data reporting of cryptocurrency firms. • Introduce regulations to prevent ‘pump & dump’ plans where an organization or person artificially inflates an asset’s worth for profit.

Following an unstable year in cryptocurrency markets in 2022, the Economic Secretary to the Treasury, Andrew Griffith, believes in attaining “effective, clear, timely regulation & proactive arrangement with industry. “As the UK’s cryptocurrency sector voice, we welcome the positive attitudes towards massive regulatory clarity,” Ian Taylor, Board Advisor of Cryptocurrency UK, stated in his statement. “Identified the provisions within the recommended legislation, consultation with the crypto industry might not be more crucial.”[I don't want to alter this gibberish if it's indeed a direct quotation.]

He also noted that the group will react to the consultation & support regulation “that is good enough to fit for purpose.”

What is in the coming times?

UK Cryptocurrency exchanges will be required to strengthen their compliance departments, as operating a cryptocurrency exchange will be regulated by the FCA beyond its current anti-money laundering arrangements. Proposed crypto exchanges will be required to supply many details, including risk management procedures, operations, plans, financial resources, and other conditions. They will be held responsible for developing control systems to detect & deter market abuse.

Cryptocurrency lenders will also require Federal conduct authority authorization. It also needs the prospective rules describing the operational remit for cryptocurrency custodians. Crypto Tokens traded on a UK cryptocurrency exchange will be subject to conventional finance market abuse regulation. The proposed legislation covers offenses such as market manipulation, insider dealing, and illegal declaration of inside information.

Also, those who offer cryptocurrency trading services will have to follow the trading rules and regulations of the European Union’s financial market. These include getting the best outcome when performing client orders. Stablecoins, directed in the Financial Services & Markets Bill, function their way by Parliament. Although the Treasury examines “activities related to the bogus algorithmic stablecoins must be subject to the same need as for unbacked cryptocurrency assets.” If we talk about initial coin offerings (ICO), the proposed recommendation likely treats them as security offerings. It would be up to the cryptocurrency exchanges to do due diligence on the crypto token. It also ensures obligatory disclosure documents and admission are filed precisely. The more difficult prospectus documents that an organization files when doing an IPO won’t be required in an ICO.

The Treasury calls for an assisting hand from respondents on particular topics to offer more data on decentralized finance, sustainability, and other cryptocurrency activities like mining, staking & investment advising.