The consultation is happening while the cryptocurrency market is experiencing turbulence due to a number of factors, including the abrupt collapse of major exchange FTX and the declining value of Bitcoin.
After widespread demands for action in the wake of the catastrophic collapse of one of the world’s major trading exchanges, the Treasury has unveiled ideas to regulate bitcoin. The government has said that it wants exchanges to have fairer and stronger rules in order to have a “robust” approach to digital assets that is in line with conventional finance.
According to the proposed changes, crypto exchanges would be in charge of establishing the criteria that a currency must follow in order to be traded on their platforms. The responsibility for the security of client funds and the smooth operation of trades rests with the exchanges as well. The deputy governor of the Bank of England recently said that cryptocurrency trading is “extremely hazardous” to stay unregulated.
In light of the recent collapse of cryptocurrency exchange FTX, Sir Jon Cunliffe warned that the industry is “extremely volatile” and that investors need more safeguards. Nearly eighty thousand clients in the United Kingdom were affected when the second-largest cryptocurrency exchange in the world went bankrupt, and one British investor lost over a million pounds.
Does the government have enough plans?
People criticized the proposal’s timing, saying it came too late as the cryptocurrency market tries to win back the trust of wary investors. Since FTX’s demise, widespread market instability has caused Bitcoin to drop to a five-month low and led to a 20% reduction in staff at major exchange Coinbase.
A little over a year ago, then-chancellor Rishi Sunak said that he aimed for the United Kingdom to become a global crypto asset center. The government is still dedicated to supporting crypto, according to Treasury economic secretary Andrew Griffith, who also emphasized the need to protect consumers who are embracing this new technology.
The Treasury believes the law would be a global first, so it should come before the EU’s projected crypto legislation in 2024. The measures will first be presented for comment. After cracking down on “misleading” advertisements, the Treasury has stated it would provide a temporary exception to allow more crypto asset businesses to release promotions.
While the wider legislation is being established, businesses that are registered with the Financial Conduct Authority for anti-money laundering reasons will be permitted to continue doing so. In other words, “we’ve been waiting a long time,”
Partner at Keystone Law and crypto fraud specialist Louise Abbott was pleased with the recommendations. According to her, criminals were drawn to the cryptocurrency market because of the absence of regulation.
“Working in the field of fraud investigation, I have seen a meteoric rise in crypto scams and fraud over the previous decade. Every day last year, I would receive a call from someone who had been scammed by a cryptocurrency.”
It is in the best interests of both exchanges and investors for tighter control of the market, and Ms. Abbot expects the legislation will be in place by summer.
The largest cryptocurrency exchange, Binance, which will be outlawed in the United Kingdom in 2021, has expressed its approval of the Treasury’s policy, stating that regulation “helps to foster innovation and is fundamental to creating confidence.”
Also calling the measures a “good start” is Varun Paul, formerly the head of fintech at the Bank of England and now with crypto infrastructure firm Fireblocks.