CryptoUK Publishes Response to HMT Cryptoasset Consultation Paper

Table of Contents

• CryptoUK’s Recommendations

CryptoUK today published a detailed response to His Majesty’s Treasury’s (HMT) Future Financial Services Regulatory Regime for Cryptoassets consultation paper.

CryptoUK, the trusted voice of the crypto industry in the United Kingdom, published a detailed response to His Majesty’s Treasury’s (HMT) Future Financial Services Regulatory Regime for Cryptoassets consultation paper.

Consultation proposals included strengthening rules for cryptocurrency trading platforms and a robust world-first regime for crypto lending. The consultation began in February and will close on 30 April 2023. Following its closure, the UK government will consider feedback and work to formulate a response to consolation proposals.

Su Carpenter, Director of Operations at CryptoUK, commented on the consultation, saying:

“We believe that a regulatory regime for cryptoassets is key to enabling the UK to be competitive as a destination for the fast-growing cryptoasset market.”

Adding:

“We support the ‘same risk, same regulatory outcome’ approach and continued UK commitment to the development and promotion of international standards, given the cross-border nature of the crypto-asset industry.”

Carpenter further said:

“We would welcome the UK taking a leading role in promoting safe and orderly cryptoasset markets given that this will both support the further development of the crypto industry as well as the competitiveness of the UK as a destination for crypto firms.”

Concluding:

“We welcome proactive engagement with industry by the HMT and Financial Conduct Authority (FCA) in preparation of both a UK crypto asset regulatory framework.

We suggest taking a broader view at all of the enablers for the UK to deliver on its ambition to become a global hub for the crypto industry, which includes a proportionate application of FinProm rules to trading venues, addressing concerns of de-banking by the crypto industry and progressive tax policy that addresses the nuances of the asset class.”

CryptoUK’s Recommendations

Su also detailed CryptoUK’s specific recommendations on HMT’s regime.

A predictable and transparent registration process:

“We support an indicative timeline for the entire application process and welcome detailed, clear and upfront guidance on expectations towards industry by the FCA akin to the recent feedback statement on good and bad quality applications under the Money Laundering Regulations.”

Pragmatic rules around disclosures:

“We believe that disclosure requirements should provide the right information to consumers but not put disproportionate liability on trading venues. We also suggest international alignment with other jurisdictions to avoid multiple disclosure standards emerging.”

Custody and safekeeping of client assets are fundamental to building consumer trust:

“Trading venues should segregate holdings of cryptoassets on behalf of their clients from their own holdings, and make this verifiable through periodic on-chain checks.”

Setting a global standard for safe, transparent and orderly markets:

"We believe that the FCA can take a leading role globally in promoting safe, transparent and orderly markets through adoption of a phased approach where trading venues are first responsible for implementing market abuse rules on their own venues before adopting trade surveillance tools at a global level.” 

The creation of an asset-reference stablecoin category:

“We acknowledge that only fiat-backed stablecoins are likely to be considered and/or allowed to be marketed as stablecoins or e-money. However, we believe a broader stablecoin category or regime that includes algorithmic stablecoins and crypto-backed tokens could be prudent, and would reflect the reality that these cryptoassets continue to have use cases in cryptoasset ecosystems, such as trading pairs."

DeFi remains nascent and non-systemic and may require new approaches:

“We are supportive of HMT’s forbearance in seeking to develop a prescriptive framework for the regulation of DeFi before any international standards and approaches emerge. We would support a separate consultation of industry in the identification and development of industry best practices and potential novel supervisory approaches.” 

Clarity on the regulatory treatment of staking:

“We would support industry consultation on regulatory treatment of staking in the short term given its growing importance for the cryptoasset industry.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.