- The U.K. will start to regulate crypto assets in early 2024, starting with stablecoins.
- The rules do not cover crypto assets falling under current regulations.
The U.K. has published final rules for regulating the crypto ecosystem. The Monday update shows the government will initiate a phased introduction of crypto rules starting in early 2024. Regulations for fiat-backed stablecoins are expected to start early in the year, followed by algorithmic stablecoins.
The U.K. says the regulations aim to reduce the potential harm of crypto assets to customers. It also seeks to address financial stability risks from deploying stablecoins in payments.
Other areas targeted in the regulatory regime are crypto activities like lending and trading. The rules will bring the activities under the U.K. Financial Conduct Authority (FCA) and other statutory bodies.
The proposals come when the U.K. crypto investors have decried delays in industry rules and poor feedback from the regulator. Recently, the U.K. banned crypto promotions, prompting some firms to cut their services in the country.
Treasury Minister Andrew Griffith believes the final proposals will make the U.K. a hub for starting and scaling digital asset services. His sentiments come amid calls by some lawmakers against regulating cryptocurrencies under the conventional financial services rules.
Rules for Security Tokens, NFTs, and DeFi
The government document clarified regulations for crypto assets considered traditional financial instruments and non-fungible tokens (NFTs);
“The proposed regime does not intend to capture activities relating to cryptoassets, which are specified investments that are already regulated – e.g., security tokens.”
According to the publication, unique NFTs, similar to collectibles and artwork, are not subject to financial services regulations. NFTs applied as exchanged tokens, or those released at once in large numbers and do not fluctuate much in price could fall into the rules in the future.
Also, the U.K. regulator does not intend to prohibit decentralized finance (DeFi). It says it is premature to regulate the industry.
The FCA is now expected to consult on the regulation regime for crypto companies. The regulator is also expected to clarify the rules for overseas firms seeking establishments in the U.K.
