The UK Finance Ministry will announce a new regulatory framework for cryptocurrencies in the coming weeks, focusing on stablecoins.
According to people familiar with the matter, the new regulations will be friendly to the crypto industry, providing some clarity to combat the murkiness of existing rules. According to reports, Treasury officials have shown a willingness to learn about the crypto market, consulting with crypto firms and trade groups, including Gemini exchange.
Gemini issues its own stablecoin, which derives its value from the US dollar. Stablecoin usage has coincided with the trajectory of the wider crypto market, with Tether, the largest stablecoin globally, having a supply of over $80B, up $76B from two years ago. Despite the popularity of stablecoins, regulators have raised concerns that sufficient fiat currency reserves may not back the coins and that criminals are using them to launder funds and participate in other criminal activities.
UK following Biden administration’s lead
The Bank of England called on regulators to minimize cryptocurrencies’ risks to financial stability. The Deputy Governor of the Bank of England penned letters to multiple bank CEOs, citing “increased interest” from banks and investment firms looking to enter different crypto markets. This comes after US president Joe Biden called on varied US Federal Agencies to coordinate efforts on crypto regulation, assigning departments from Treasury to Commerce research projects on various topics, including the launch of a government-backed stablecoin. Brian Deese, who heads up the White House’s National Economic Council, and National Security Adviser Jake Sullivan, said that the new executive order “identifies the administration’s policy priorities, both for cryptocurrencies and any future US Central Bank Digital Currency.”
Many crypto industry insiders lament the lack of similar governmental coordination in the UK, although the government has enlisted the help of the Massachusetts Institute of Technology in researching a central bank digital currency.
FCA registration deadline looms
A few crypto companies in the UK could be forced to cease operations should they fail to be registered on the Financial Conduct Authority’s crypto-asset register by March 31, 2022. Registration is only enacted if the Financial Conduct Authority in the UK deems crypto firms’ anti-money laundering policies meet FCA standards. Over 80% of firms assessed have either retracted their applications or been flat-out rejected by the FCA.
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