Crypto is currently unregulated globally, with firms only
having to carry out checks to prevent money laundering. However, Britain's
Financial Conduct Authority (FCA) has said that more than 80 percent of license
applicants were unable to show they could do this properly as "dark
money" flows through the sector.
The draft rules, to be published on Wednesday, would ensure
robust, transparent, and fair standards, consistent with the approach to
traditional finance, Financial Services Minister Andrew Griffith said in a
statement on Tuesday.
"We remain steadfast in our commitment to grow the
economy and enable technological change and innovation – and this includes
cryptoasset technology," Griffith said.
The new rules come after rising interest rates led to a string
of bankruptcies in the sector in 2022, wiping $1.4 trillion off the value of
the crypto market. The price of Bitcoin, the most widely traded coin, plunged
60 percent.
The market rout shook confidence in cryptocurrencies, though
interest in the underlying technology, most commonly known as blockchain, for
other uses like payments remains.
There will be a three-month public consultation on the new
plans, followed by proposals for detailed rules from the FCA.
The ministry said its approach would mitigate the most
significant risks in the sector.
"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 ministry said.
There will be rules for financial intermediaries, which
facilitate transactions, and custodians, which store customer assets.
The failure of FTX and other exchanges triggered calls for
regulation of the industry to protect investors. Regulators are focusing on
prising open "crypto conglomerates" which combine activities like
trading, lending and custody under one roof, but with traditional regulatory
safeguards between them absent.
The European Union is already finalising its first set of
crypto rules.
Firms already authorised by the FCA would be temporarily
allowed to issue their own promotions, while the new regulatory regime is being
introduced, the ministry said. © Reuters