U.K. Parliament looks to increase its regulation of foreign crypto entities in the wake of the FTX collapse
(Kitco News) - The U.K. government is preparing to unveil a package of amendments containing new rules for the regulation of the crypto industry that will help reign in the industry's "wild west" nature in the wake of the FTX collapse.
According to a report from the Financial Times, the new regulations will establish limits on foreign companies selling crypto in the U.K., include provisions for how to deal with companies that go belly up, and place restrictions on advertising crypto products.
The amendments are intended to be applied to the U.K. Financial Services and Markets bill, which is currently making its way through Parliament. The bill outlines the U.K.'s approach to financial regulation in the post-Brexit world.
Previously, in late October, parliament member Andre Griffith proposed several amendments to the Financial Services and Markets bill that sought to "clarify that the powers relating to financial promotion and regulated activities can be relied on to regulate crypto assets and activities relating to crypto assets."
The changes outlined by the newly proposed amendments will give the Financial Conduct Authority (FCA), the U.K.'s financial regulator, the ability to oversee the crypto industry on a broader scale. This includes the ability to monitor how companies operate and advertise their products.
The FCA will also take a more active role in limiting the ability of foreign crypto companies to operate in the U.K. market and will establish a process for how existing companies can start the process of winding down their services.
According to Bradley Duke, Co-CEO at leading crypto ETP provider ETC Group, this move by regulators in the U.K. is long overdue and comes “as the country’s fintech investment crown has been slipping for some time due to the arm’s length approach to cryptocurrency of successive governments.”
“What is needed is clear and well thought out regulations that would leave crypto firms in no doubt as to the standards required to operate in the UK,” Duke said. “This, in turn, would give investors confidence in the sector, especially given the recent collapse of FTX.
The new amendments come as the U.K. is making a concerted effort to become a global hub for cryptocurrencies, a goal that was laid out by Prime Minister Rishi Sunak in April of this year, while he was still chancellor. According to Sunak, "Effective regulation" will help establish the U.K. as a global crypto hub and encourage "the businesses of tomorrow to invest, innovate and scale up on U.K. shores."
Sunak has also been a big proponent of the creation of a central bank digital currency (CBDC) in the U.K., a topic that generates mixed feelings in the crypto community. According to Jake Boyle, Chief Commercial Officer at cryptocurrency broker Caleb & Brown, while the topic of CBDCs is not popular among crypto holders, their ongoing exploration shows that the government is actively exploring the potential applications of blockchain technology and sees a future for the industry.
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As for how the eventual passage of the bill will affect the broader crypto market, Boyle suggested that the actions of the U.S. Federal Reserve continue to be the main driver of volatility in the crypto market, a fact that is unlikely to change anytime soon.
"There are so many variables that people will talk about, whether it's coming from Parliament or the dollar. There are numerous variables, but at the end of the day, it's the stance of the Fed in the USA, which has ultimately been driving a lot of the volatility we've seen this year."
The bill, which covers many topics outside of cryptocurrencies, was first launched back in 2021 but is not expected to be voted on until 2023 due to "fast-moving events" in the crypto industry.
The latest amendments come on the heels of a busy year policing the crypto industry in the U.K. Back in March, the FCA sent out a public alert saying that all the crypto ATMs operating in the country were doing so illegally and urged consumers to avoid using them until they are properly registered.
On Wednesday, the cross-party Treasury select committee will hold a hearing where experts from the FCA and Bank of England will discuss the risks of crypto and explore the positive and negative aspects of developing a digital pound. Included in the hearing will be testimony from an investigative journalist who will speak to the losses experienced by football fans who purchased "fan tokens" and other cryptocurrencies that were endorsed by high-profile players and clubs.