HM Treasury (HMT) has today published its eagerly awaited response to the consultation and call for evidence on the ‘Future Financial Services Regulatory Regime for Cryptoassets’, it provided an update on plans for the regulation of fiat-backed stablecoins and also shared its response to the consultation on ‘Managing the Failure of Systemic Digital Settlement Asset (Including Stablecoin) Firms’.
Response to the ‘Future Financial Services Regulatory Regime for Cryptoassets Consultation
The government’s economic and finance ministry received a total of 131 responses to the consultation from a wide range of stakeholders. In April CryptoUK provided its response, in partnership with and on behalf of our members. We are reassured to see that the government has taken into consideration some of the key concerns raised both within our response and during the consultation process.
In addition, since publishing the proposals, HMT has engaged with more than 80 organisations, mostly through a series of multilateral workshops and roundtables. We would like to recognise the invaluable contribution of many of our members to this effort, and thank HMT and the FCA for their open engagement with our organisation and the industry during and after the consultation process.
HMT has reported that in terms of general sentiment, around 80% of responses were broadly supportive of the government’s overall approach. CryptoUK is encouraged that HMT has listened to industry concerns and welcomes its response and acknowledgement that “the government’s ambition to make the UK a global hub for cryptoasset technologies remains steadfast”. This is an aim shared by CryptoUK and clarifying the UK’s regulatory regime is critical to its realisation.
We are pleased to see the Treasury acknowledge that it would be “premature and ineffective” to regulate DeFi activities currently, something which CryptoUK and its members have consistently flagged to lawmakers. We also welcome the HMT’s stance on business models and corporate structures, including the statement that it does not intend to “explicitly endorse or prohibit specific models”. It is also clear that the Treasury has listened to industry concerns and understands that clarifying the future regulatory treatment of staking in the UK is a key priority for many stakeholders and welcome its commitment to accelerating exploratory work on this topic.
Update on Plans for the Regulation of Fiat-backed Stablecoins
For some time CryptoUK has been calling on HMT to provide clarity on when the FCA would be given powers to regulate stablecoin issuers, most recently during our meeting with Economic Secretary to the Treasury Andrew Griffith at the Conservative Party Conference. The lack of clarity on this issue has been causing our members concern and impacting investment decisions in the UK.
Today HMT has confirmed its intention to bring forward secondary legislation as soon as possible and by early 2024, subject to available parliamentary time. These legislative provisions will bring activities relating to fiat-backed stablecoins into the regulatory perimeter, enabling the FCA to regulate them. This policy update sets out further detail on the objectives of the proposed legislation to facilitate the FCA’s regime.
Response to the Consultation on ‘Managing the Failure of Systemic Digital Settlement Asset (Including Stablecoin) Firms
The government consulted on its approach to managing the failure of a systemic digital settlement asset (including stablecoin) firms by applying a modified Financial Market Infrastructure Special Administration Regime (FMI SAR) to such firms. Overall, respondents were broadly supportive of the proposed approach.
Some respondents sought clarity on how the FMI SAR would be applied in practice, especially with regard to the additional return or transfer of customer funds and custody assets objective.
As set out in the response, the government intends to lay regulations to implement the policy intent described in the consultation in due course and will provide further clarity on the operation of the modified FMI SAR by making insolvency rules.
Next Steps for CryptoUK
We will continue to work closely with the government and regulators on these issues, which impact tens of thousands of jobs across the UK and continued investment into the British economy.
If you would like to be involved in CryptoUK’s advocacy work but are not yet a member please contact us to learn more.