The crypto assets market is still relatively small, but rapidly growing, while many participants are SMEs and start-ups.
Since 10th January 2021, all UK crypto asset firms must be registered with the FCA under regulations to combat money laundering. It is a criminal offence to operate without such registration.
However, there is another issue high on the agenda in the market. The regulator said it has concerns about high-return investments based on crypto assets in a number of areas. IN response to this The Treasury has commenced a three month consultation process for proposals for a new regulatory approach to crypto assets and stablecoins.
The Government wants to ensure that any regulation also seeks and enables responsible innovation to occur, particularly where risks are well-communicated and understood. The Government wants to ensure that crypto asset use does not threaten stability in the market and safeguards are in place to avoid their use in illicit activities. It is therefore considering an approach in which the use of currently unregulated tokens and associated activities primarily used for speculative investment purposes, such as Bitcoin, could initially remain outside the perimeter for conduct and prudential purposes.
At the same time, these would be subject to more stringent regulation in relation to consumer communications via the financial promotions regime (if adopted) and anti money laundering/countering terrorist financing regulation. Utility tokens (those used for a service) would also remain outside the authorisation perimeter.
However, the consultation says that stablecoins (those linked to other currencies) would be treated differently. The government therefore proposes to first introduce a regulatory regime for stable tokens used as a means of payment. This would cover firms issuing stable tokens and firms providing services in relation to them, either directly or indirectly to consumers.