UK Plans To Launch First Tougher Crypto Regulations

British Finance Services Minister, Andrew Griffith. (photo: twitter @griffitha)

JAKARTA - The UK Ministry of Finance is planning to establish "robust" regulations for crypto assets, following the collapse of the FTX crypto exchange last year, which caused millions of people to lose billions of dollars.

Crypto is currently not regulated globally, as companies only need to carry out checks to prevent money laundering. However, the UK's Financial Conduct Authority (FCA) says that more than 80% of applicants for licenses are unable to demonstrate they can do it properly due to "dark money" flowing through the sector.

According to Financial Services Minister Andrew Griffith in a statement on Tuesday, January 31, the draft rules, which will be published on Wednesday, February 1, will ensure robust, transparent, and fair standards, consistent with traditional finance approaches,

“We remain steadfast in our commitment to growing the economy and enabling technological change and innovation – and this includes cryptoasset technology,” said Griffith, quoted by Reuters.

The new rules come after a rise in interest rates led to a series of bankruptcies in the sector in 2022, wiping US$1.4 trillion (IDR 20.9 quadraliun) from the market value of cryptocurrencies. The price of bitcoin, which is the most heavily traded, plunged 60%.

The market rout has shaken faith in cryptocurrencies, although interest in the underlying technology, most commonly known as blockchain, for other uses such as payments persists.

There will be three months of public consultation on the new plan, followed by a detailed regulatory proposal from the FCA.

The Ministry of Financial Services says its approach will mitigate the sector's most significant risks.

"This proposal will place the onus on crypto trading venues to define detailed content requirements for acceptance and disclosure documents, ensuring crypto exchanges have fair and robust standards," the ministry said.

There will be rules for financial intermediaries, who facilitate transactions, and custodians, who hold customer assets.

The failure of FTX and other exchanges sparked calls for industry regulation to protect investors. Regulators focus on gift-giving open "crypto conglomerates" that combine activities such as trading, lending, and custody under one roof, but lack traditional regulatory protections between them. Meanwhile, the European Union has finalized its first set of crypto rules.

According to the Ministry of Financial Services companies that have been approved by the FCA will temporarily be allowed to issue their own promotions, while new regulations are being introduced.