The UK's Treasury is finalising plans for a swathe of new rules to regulate the cryptocurrency sector.
According to the Financial Times, the new regulatory regime will include limits on foreign companies selling into the UK, provisions for how to deal with the collapse of companies and restrictions on the advertising of products.
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The collapse of the FTX cryptocurrency exchange has dealt a critical blow to the reputation of this "wild west" industry and UK officials have been quick to show that they are taking action.
Ministers are now set to take part in a consultation on the new regulatory regime and on Wednesday the Treasury Committee will hold another evidence session with the Financial Conduct Authority as it continues its inquiry into the crypto-asset industry. Wednesday's meeting will also hear evidence of how football fans have lost out through crypto tokens endorsed by high-profile players and clubs.
Prime minister Rishi Sunak said in April, while still chancellor, that “effective regulation” would help make the UK a global hub for crypto asset technology and would encourage “the businesses of tomorrow to invest, innovate and scale up on UK shores”.
The FT reported that people familiar with the Treasury's thinking claim that the FCA will attain new powers to oversee crypto more broadly, including monitoring how companies operate and advertise their products.
Currently, the Financial Conduct Authority, FCA, has been conducting money-laundering inspections of UK-based crypto firms and stated that 85% of the firms that applied to join the regulator’s crypto register did not pass its anti-money laundering tests.
Additional regulations could see a restriction on selling into the UK market from overseas and further rules on how crypto companies can be wound down.
The new regulatory powers are planned to be included in the financial services and markets bill.
The financial services and markets bill is currently passing through parliament and it deals with the UK’s post-Brexit approach to financial regulation.
The bill was amended in late October to include future provisions for regulating the cryptocurrency industry.
The appointment of Rishi Sunak as prime minister in October was seen as a fresh opportunity to set favourable regulatory conditions to promote the UK as a world-leading crypto-hub.
Speaking at an event in Edinburgh the UK's City minister Andrew Griffith last week reinforced that the UK still wished to remain a hub for blockchain technology.
He said: “Yes, there are questions about the future of crypto, but we’d be foolish to ignore the potential of the underlying technology."
Griffith added that policymakers were planning to create a framework for regulating cryptoassets and stablecoins, and that the government would be “consulting on a world-leading regime for the rest of the cryptoasset market later this year”.
Speaking to The Financial Times a Treasury spokesperson said: “The UK is committed to creating a regulatory environment in which firms can innovate, while crucially maintaining financial stability and regulatory standards so that people and businesses can use new technologies both reliably and safely.
“The government has already taken steps to bring certain cryptoasset activities into the scope of UK regulation, and will consult on proposals for a broader regulatory regime.”
Crypto analysts have identified key areas where new prime minister Rishi Sunak could boost the UK's standing as a hub for digital assets, distributed ledger technology and cryptocurrencies.
In April, Sunak elaborated on a plan to make the UK “a global cryptoasset technology hub”, where alongside former Economic Secretary to the Treasury John Glen, he laid out a comprehensive roadmap for UK’s crypto future.
On Tuesday, bitcoin (BTC-USD) side-stepped along the $17k mark, rising by 2% in the past 24 hours.
Ether (ETH-USD), the second-largest cryptocurrency, tip-toed in its footsteps, up 2% in the past day to $1,289.
Watch: US Senator: 'Digital assets will be as big as the internet itself' | The Crypto Mile