The government is announcing plans to “robustly” regulate the cryptocurrency industry.
It says that the plans, which will be made public on Wednesday, will give consumers confidence and help the sector “thrive.”
Critics say that ministers should be careful because the industry has been in a long-term slump around the world.
Companies have shut down because of the crisis, the value of cryptocurrencies has dropped, and customers have lost a lot of money.
The Treasury says that its plans, about which it is holding a public hearing, will:
Make sure that customer assets are returned to them if a crypto business goes out of business. Set rules for crypto-asset promotions that are fair, clear, and not misleading. Improve data-reporting requirements, including with regulators.
-called “pump and dump,” where someone artificially raises the price of a cryptocurrency before selling it.
Ministers say that the measures will “mitigate the most significant risks” of crypto technologies while “harnessing their advantages.”
Andrew Griffith, who is the Economic Secretary to the Treasury, said that the government was “still committed to growing the economy and allowing technological change and innovation, and that includes crypto-asset technology.”
“But we also need to protect consumers who are using this new technology by making sure standards are strong, clear, and fair,” he said.
In 2021, when the crypto market was booming, there were still loud calls for regulation.
After the chaos of 2022, everyone is yelling for order.
Due to scandal after scandal, hundreds of billions of pounds were lost in the crypto world, and companies and people went out of business.
Consumers and investors who have been hit in their pockets will be glad to hear that the UK plans to finally put concrete plans in place.
But I think the consultation will be heated, with lots of different groups weighing in on how to tame Bitcoin and other digital currencies.
At first, one of the things that made cryptocurrency appealing was that it wasn’t tied to traditional financial networks.
Some true believers will be angry if the establishment is given more power.
Others will say that the industry could really grow if it had the right kind of rules.
The UK’s chancellor at the time, Rishi Sunak, said last year that he wanted to make the country “a global hub for crypto-asset technology.”
But since then, the industry as a whole has been hit by a number of crises, the most recent being the collapse of the FTX exchange, which prosecutors have called “one of the biggest financial frauds in US history.”
Crypto assets have also lost a lot of value. Bitcoin, for example, is now worth less than half of what it was worth when it was worth more than $67,000.
‘Wild West
The so-called “crypto winter” has made people wonder if the industry can ever be regulated in an effective way.
The chair of the Treasury Committee, Conservative MP Harriett Baldwin, told BBC News that the committee had heard evidence of “truly Wild West behavior” but also that “valuable technological innovation” was happening that could help the UK economy.
“We are paying close attention to these plans and the plans of the regulators,” she said. “We don’t want our constituents to think that cryptocurrencies are less risky if they are regulated.”
Wisdom Tree’s European head of digital assets, Jason Guthrie, said that the sector had a bright future. He told BBC News that the “devil would be in the details,” but he “absolutely welcomed” regulators looking into cryptocurrency. The right regulation would be in the best interests of both the industry and its customers.
“It’s really important for consumer confidence to have a strong regulatory framework and the ability to enforce it,” Mr Guthrie said.
“The sooner we have details about concrete proposals, the easier it is to plan and build toward them.”
‘Open for business.’
Jeremy Barnett, a lawyer and honorary professor of algorithmic regulation at University College London, said that the UK had a lot to gain because entrepreneurs were currently choosing to set up elsewhere.
“If you don’t have a good system, people will leave,” he said.
“I want to make it easier for people with cryptocurrency services and products to start businesses in the UK.
“We should be in this space, but it does need to be controlled and regulated.”
The deadline for comments on the government’s plans is April 30. After that, ministers will look at any responses.
Once a law is passed by Parliament, it will be up to the regulator, the Financial Conduct Authority, to write the detailed rules that the sector will have to follow.
