On the 1st of February, in a consultation paper, the UK Treasury outlined new rules that could see increased responsibility placed on crypto companies when it comes to their needs for disclosure documents and authorization. According to the consultation paper, this proposed regime would be based on the current Financial Services and Markets Act 2000, the same act that governs traditional trading platforms. These new rules from the UK Treasury mean that UK regulators would need to authorize crypto firms before they can set up shop in the UK.
According to the 1st of February report from Decrypt, Blair Halliday, the UK managing director of cryptocurrency exchange Kraken, regarding this latest regulatory move from the UK Treasury, said that the UK government’s priority should be to underline why crypto assets firms should be inside the perimeter. Currently, there are no little preventing firms based outside the perimeter from providing services and products to the UK market, Blair added. Blair believes that this move could expose UK institutions and customers to extra risk.
According to the consultation paper, applications for setting up shop in the UK would need to include the crypto firm’s business plans outlining its operations. They also need to describe controls and risk management processes, as per the consultation paper. The crypto firms or custodians that hold crypto to protect them from theft or loss, would also be impacted by these new rules by the UK Treasury. Moreover, in the consultation paper, the UK Treasury has made clear that adjustments due to the limitations of changing an existing regime to a new asset class can be also made.
In the consultation paper, the UK Treasury claimed that the proposed rules may require to be modified to accommodate the special characteristics of cryptocurrencies. Moreover, in the consultation paper, the UK Treasury suggested measures to prevent market misuse and insider trading. This latest proposal also suggested some more expansive rules for lending platforms, such as adequate risk warnings for customers lending to these platforms and clear contractual requirements.