It finally happened: The United Kingdom has published its final considerations regarding the regulation of local cryptocurrencies. However, this is a gradual introduction, as the specific legislation will appear at the beginning of next year, which, in particular, will deal with stablecoins.
The list of proposals would include the inclusion of a set of activities related to cryptocurrencies in the scope of regulations associated with financial services. These activities will cover all companies that provide their services to residents of the country, regardless of whether their headquarters are located abroad.
In this regard, those entities operating commercially in the country will require a license from the UK’s Financial Conduct Authority (FCA), for which they will have to comply with a number of serious requirements. Among them, exchanges will have to include admission requirements as well as certain reporting requirements when listing new digital currencies.
These provisions are in line with the policies set out in 2022 by Rishi Sunak, current Prime Minister of the United Kingdom, and then Finance Minister. The aim of this plan was to encourage cryptocurrency transactions in the country, which entailed offering greater clarity regarding trading and activities with this group of assets. Andrew Griffith, the current Chancellor of the Exchequer, has welcomed the new regulatory provisions as this new framework would present the UK as the preferred choice for starting and developing cryptocurrency-based businesses.
Regarding stablecoins, it has been established that operations using these assets will also be subject to the jurisdiction of the FCA, while their regulation will be supported by the Bank of England. Among other provisions, it is worth highlighting the one that provides that the aforementioned bodies will be regulators of those issuing and holding stablecoins, as well as payment systems, digital settlement and services linked to such assets. It is striking, however, that decentralized finance (DeFi) has been explicitly excluded from the regulation. Indeed, the submitted report reads:
In particular, we are pleased to see that the Treasury acknowledges that it would be ‘premature and ineffective’ to regulate DeFi activities currently (…)
For now, we must wait for the corresponding authorities to evaluate these clarifications and for them to be applied in accordance with the legislation in force.