On Wednesday, the Finance Ministry in Britain established its first set of rules that were aimed at the regulation of cryptoassets.
It said that the downfall of the FTX crypto exchange and the ongoing turmoil in the sector had highlighted risks that need to be addressed.
Regulation
There is little global regulation that has been developed for cryptoassets, like bitcoin, but regulators have become more proactive in this regard after the collapse of FTX late last year.
This was due to the fact that the exchange’s downfall saw millions of people suffer losses that total billions of dollars, many of whom were in Britain.
Andrew Griffith, the Financial Services Minister, stated that it highlighted that it was time for them to engage with the industry and develop effective, clear, and timely regulation.
He said that the proposals they had developed included one that would bring centralized crypto exchanges under the oversight of financial services for the first time.
Likewise, he stated that it would also regulate other core activities, including crypto lending and crypto custody.
The rules
The proposals that the Finance Ministry in Britain has developed are now open for public consultations and as mentioned earlier, they cover different aspects of the crypto industry.
The new rules would apply to operating a blockchain or a crypto trading platform, executing mining transactions, offering custody services, opening an account on a crypto-related platform, conducting transactions, and more.
It should be noted that the rules have been created to apply to crypto companies that are operating within the United Kingdom.
They would make it mandatory for crypto firms to obtain a license before they are authorized to offer their services and this would only be granted if they meet certain liquidity and minimum capital requirements.
The Financial Conduct Authority (FCA), which is the regulatory body of the UK, would decide if a foreign company has to have a base of operations in the country for offering its services.
The reaction
Market analysts said that the proposals that have been laid out for public consultation would be a step forward in cryptoassets’ regulation in the UK.
They added that it was an indication that the crypto sector is going to see regulation soon enough in different countries.
Under the existing rules, crypto companies are only required to comply with anti-money laundering rules, but this has not stopped the illegal flow of money.
On Wednesday, Binance, the world’s biggest crypto exchange in terms of trading volume, responded positively to the news of regulation in the UK.
It said that it had been a supporter of regulation because it would help in the mainstream adoption of crypto in the future.
The public consultation will end in three months, after which they will introduce secondary legislation as well as detailed proposals for rules that will be set forth by the FCA.
Britain is also planning on ‘recognizing’ similar rules that apply elsewhere in order to give authorization to companies operating elsewhere to do the same in the UK without requiring a physical presence.
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