UK sets out plans to regulate crypto and protect consumers

The proposals include strengthening rules for crypto trading platforms and a robust world-first regime for crypto lending and delivering on a financial services road map by embracing technological change and innovation.

Crypto assets — commonly known as ‘crypto’ — are a relatively new, diverse, and constantly evolving class of assets that have a range of potential benefits as well as posing risks to the consumer.

As is common in emerging technology markets, the crypto sector continues to experience high levels of volatility and a number of recent failures have exposed the structural vulnerability of some business models in the sector.

The government’s new plans to regulate the sector aim to mitigate the most significant risks while harnessing the advantages of crypto technologies.

Under plans set out by the government, it will seek to regulate a broad suite of crypto asset activities, consistent with its approach to traditional finance.

These proposals will place responsibility on crypto trading venues for defining the detailed content requirements for admission and disclosure documents — ensuring crypto exchanges have fair and robust standards.

The proposals will also strengthen the rules around financial intermediaries and custodians, which have responsibility for facilitating transactions and safely storing customer assets. These steps will help deliver a robust world-first regime strengthening rules around the lending of crypto assets while enhancing consumer protection and the operational resilience of firms.

As part of this approach, the consultation will seek views on improving market integrity and consumer protection by setting out a proposed crypto market abuse regime.

In addition, to address industry concerns about the small number of Financial Conduct Authority (FCA) authorised crypto asset firms that can issue their own promotions, HM Treasury is also introducing a time-limited exemption.

Crypto asset businesses that are registered with the FCA for anti-money laundering purposes will be allowed to issue their own promotions while the broader crypto asset regulatory regime is being introduced.

This approach delivers on the original policy intention of the measure to promote innovation, enhance consumer protection, and ensure that crypto asset promotions can be held to equivalent standards as promotions of financial services products with similar risk profiles.