The regulatory developments influencing cryptocurrencies are picking up speed. Including the European Union, where MiCA was approved, and the United Kingdom. But, as the former accelerates, will the latter be able to keep up?
The United Kingdom officially exited the European Union on January 1, 2021. The government is now free to establish its own rules and regulations, including those governing cryptocurrency. This means that the UK government can create laws and regulations governing the use of cryptocurrency. Also, decide how to handle issues like taxation, money laundering, and consumer protection. In this section, we compare the United Kingdom’s efforts to those of its former European Union partners.
Playing the Crypto Game
In reality, even before leaving the EU, the UK has begun to regulate cryptocurrency. The Financial Conduct Authority (FCA) issued important recommendations in 2019. It underlined that, based on their qualities and intended purpose, cryptocurrencies might be classed as “security tokens,” “e-money tokens,” or “unregulated tokens.”
The United Kingdom will very certainly continue to develop its crypto regulatory framework. This might include additional instructions from the FCA or new laws. It is also likely that the United Kingdom will collaborate with other countries to set international standards. Will the country struggle to catch up to, or even surpass, the EU in terms of crypto regulation?
New Crypto Regime
The European Union (EU) decided last month to create a new framework for cryptocurrency, known as the Markets in Crypto-assets (MiCA) law. This proposal, which has 517 supporters and 38 opponents, proposes to provide a comprehensive set of laws and regulations for digital assets. To encourage investor safety, market integrity, and financial stability.
The MiCA framework will apply to all cryptocurrency issuers, holders, and service providers. Exchanges, wallet providers, and token issuers are all included. The framework will impose different disclosure, governance, capital, and customer protection restrictions on these firms. It will also create a licencing system for service providers that will be monitored by national authorities.
Crypto Regulations in the UK
The UK must catch up to the EU in terms of implementing a crypto asset regulation framework. However, now that the UK has left the EU, it is free to create its own crypto rules. Separate from the EU-instituted MiCA system.
The UK government has stated that it is committed to establishing an effective legal framework. Dedicated to protecting consumers, promoting innovation, and combating financial crime.
Andrew Griffith, London city minister and Economic Secretary to the Treasury, said in a recent interview that the UK’s regulatory framework for cryptocurrencies would be implemented within the next 12 months. This shows that the UK government is hard at work building a regulatory framework for digital assets. And is eager to do so as soon as possible.
HMT released their brief on a legal framework for crypto assets on February 1, 2023. (With the exception of fiat-referenced stablecoins.) This most recent brief builds on previous discussions and meetings. Including a paper on stablecoins published in January 2021.
It also contributes to existing FSMB ideas to establish a regime to control “digital settlement assets.” These are fiat-backed stablecoins that are used for payments. Furthermore, industry leaders such as Binance have openly praised the crypto regulation. “It is our strong belief that a stable regulatory environment helps to support innovation and is essential to establishing trust in the industry, as well as long-term growth,” the study continued.
The UK Treasury has stated that it wishes to establish the country as a crypto hub.
Spot the Difference
It is still too early to predict how the UK’s crypto regulatory framework will differ from the EU’s MiCA, as the UK has yet to unveil comprehensive recommendations. However, there are a few areas where the United Kingdom may choose to go a different route.
For example, the United Kingdom may be more welcoming to the crypto business in order to stimulate innovation and attract investment. This could imply that the UK adopts a more flexible licencing and regulating policy or grants tax breaks to crypto firms. On the other hand, the United Kingdom may decide to be harder in specific sectors. Anti-money laundering (AML) and counter-terrorist financing (CTF) legislation, for example. Legal and industry experts have expressed varying views on the UK’s crypto strategy.
BeInCrypto has received an analysis from lawyers at the legal firm Norton Rose Fulbright. Their note compares some of the most important aspects of MiCA and the HMT Proposals. It is applicable to participants in the EU and UK crypto asset markets. Service providers, issuers, and large and small investors are all included. According to some experts, the UK should embrace a more principles-based approach, concentrating on outcomes rather than prescriptive laws. Others believe that, given its leaders’ commitment to combating financial crime, the UK should prioritize consumer protection and AML/CTF rules.