UK Treasury announces major updates in cryptocurrency regulation to pave the way for innovation

UK Treasury Unveils Significant Reforms in Cryptocurrency Regulation to Foster Innovation

Compiled by: Blockchain Knight

The UK Treasury (HMT) has released the long-awaited Crypto asset regulatory framework update, which is a significant development for the Crypto industry.

Brian Quintenz, Policy Director of venture capital fund a16z Crypto, believes that this announcement shows that the UK is committed to nurturing an open, regulated, technologically advanced capital market to embrace the potential of Crypto assets and blockchain technology.

HMT’s response to the regulation of Crypto assets covers several key aspects. First, it excludes airdrops from the scope of token issuance regulation, recognizing that airdrops do not constitute a public offering.

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In addition, the statement clarifies that non-fungible tokens (NFTs), including in-game purchases and sales of digital items, are also considered out of the regulatory scope, emphasizing that they are classified as non-financial service activities.

According to Quintenz, the UK government’s attitude towards decentralized finance (DeFi) reflects a cautious but forward-thinking stance. As the Crypto asset field expands and blockchain-based solutions gain wider adoption, HMT acknowledges the potential role of DeFi in financial services.

Importantly, the government emphasizes that it does not intend to ban DeFi, which is consistent with its innovative and forward-thinking policy.

Regarding concerns about Crypto trading, HMT strongly opposes viewing it as gambling or advocating for a comprehensive ban. The statement emphasizes that such an approach goes against international regulatory processes and may have a negative impact on innovation based on Crypto assets.

However, the statement recognizes the need for further clarification of the decentralized concept and to protect customers from risks associated with centralization.

The regulatory framework emphasizes managing risks while encouraging innovation, recognizing the developmental nature of the Crypto industry and its ever-changing complexity. Additionally, the government is exploring the potential advantages of distributed ledger technology (DLT) in financial market infrastructure and sovereign debt management.

The proposed regulatory framework aims to establish a moderate and clear regulatory environment that allows businesses to innovate while maintaining financial stability and regulatory standards. This includes for the first time bringing centralized Crypto exchanges, custody services, lending platforms, and other core activities into the financial services regulatory regime.

According to the latest news, the UK government recognizes the transformative potential of digital assets and the need for a strengthened regulatory framework to realize its benefits and manage risks effectively. The proposed regulatory regime will be incorporated into the existing framework established by the 2000 Financial Services and Markets Act (FSMA), leveraging its credibility and regulatory clarity.

HMT’s regulatory framework will undergo consultations with stakeholders, and the government will carefully consider feedback from all parties and issue further technical consultation opinions on specific rules.

The participating group, chaired by the Minister of Finance, is engaged in ongoing dialogue with key industry players to ensure that their insights contribute to the establishment of a clear regulatory framework that supports innovation and consumer protection.

The UK is taking proactive measures to achieve effective regulation of Crypto assets, with the goal of striking a delicate balance between encouraging innovation, managing risks, and providing regulatory clarity.

Finally, this announced framework positions the UK as a global center for Web3, strengthening its commitment to embracing the potential of digital asset transformation.

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