Government set to regulate crypto firms – saying failure of FTX has forced their hand
The government has confirmed it will press ahead with plans to bring crypto firms into the remit of regulators today as ministers, though spooked by high-profile failures such as FTX, look to turn the UK into a global hub for the sector.
The government said in a consultation response published this morning it would begin drawing up legislation to force crypto firms to win authorisation from the Financial Conduct Authority.
A consultation was launched by government earlier this year to weigh up the scale and scope of rules for the sector, still considered a ‘wild west’ by many in traditional finance.
Calls for firmer guardrails on the industry have accelerated globally this year after a mass sell-off and the implosion of exchange FTX. The total global market capitalisation of cryptoassets is currently around $800bn, down around 75 per cent from a peak of around $3 trillion in November 2021.
“The government’s proposed measures have been informed by recent market events – including the failure of FTX – which reinforce the case for effective regulation and sector engagement,” the Treasury said in the document today.
Ministers said they would accelerate overall implementation of the rules in order to give the sector clarity, with secondary legislation presented to parliament next year.
Under the plans, non-fungible tokens [NFTs] will be excluded from the rules and not “subject to financial services regulation”.
Crypto firms in the UK are currently only required to have safeguards against money laundering.
The move from the Treasury was welcomed by industry figures today who said it would help give the industry certainty to continue developing in the UK.
“We broadly welcome the Treasury’s response and we will continue to work closely with the Government and regulators on these issue, which impact tens of thousands of jobs across the UK and continued investment into the British economy,” said industry body CryptoUK.
“In particular, we are pleased to see that the Treasury acknowledges that it would be ‘premature and ineffective’ to regulate [decentralised finance] activities currently, something which CryptoUK and its members have consistently flagged to lawmakers.”
European Union lawmakers already approved the world’s first set of comprehensive rules for cryptoasset markets earlier this year in a move which has attracted crypto firms to set up base in the bloc.
FTX founder Sam Bankman-Fried will give evidence this week in the most high-profile crypto case in the industry’s fledgling history.