Cryptocurrencies are still in the regulatory grey region in most of the countries across the world. The U.K. regulators were keen on transforming the crypto regulatory space. Recently they produced a document outlining several proposals addressing the crypto community. In the consultation series, the regulator was interested in initiating a regulatory approach to the stablecoins and crypto-assets for 2021.
The publication revealed that the consultation is focused on the stablecoins to collect investments as the wholesale use cases. The Treasury is also seeking to collect information from stakeholders and industry in the crypto world until March 2021.
The U.K. started a cross-authority taskforce back in 2018. The task force was meant to assess the effects of having a rapidly developing crypto asset market within the economy. Currently, the H.M. Treasury is interested in ensuring the regulatory framework. It is well equipped and able to harness new technologies’ benefits. It also supports different innovations and competition. At the same time, it mitigates consumers’ risks and stability.
The Treasury also explained reasons why it was prioritizing the stablecoins in an announcement that read:
“For two years now, the landscape has been changing rapidly. The stablecoins are likely to pave the way for cheaper and faster payments, which will make it easier for individuals to pay for items or keep their money. There is evidence that DLT could have great capital markets benefits which will most likely transform the way people operate.”
The document signed by John Glen, the country’s Economic Secretary to the U.K. Treasury, adds that the current approach marks the first stage of the crypto industry’s consultative process. The regulators are also interested in finding out where most of the series risks. While doing so, they also outline the benefits of an approach risk-led to regulation.
“The U.K. government will continue with its process of monitoring the emerging and new risks as the market continues to mature. We will ensure we are ready to counter further regulatory action to ensure the market is working well for businesses and people who manage them,” revealed secretary Glen.
Ensuring the Crypto Industry is in Check
As different sources had reported it, the country’s Financial Conduct Authority (FCA) has managed to amend its anti-money laundering rules earlier in the year. It also introduced the “Temporary Registration Regime.” Crypto businesses operating in the country had to register as FCA to run their operations in the country.
Here are some of the risks FCA warns about high-return investments based on crypto assets:
- Price volatility: Huge price volatility in the crypto-assets and inherent difficulties in valuing crypto-assets places consumers at a high risk of encountering huge losses.
- Consumer Protection: Investments are advertising high returns based on crypto assets. However, the investments might not be subject to regulation past anti-money laundering.
- The complexity of a product: Some products and services complexity related to crypto-assets can make it difficult for consumers to understand risks. There is never an assurance that crypto-assets can be exchanged back for cash.
- Fees: Most consumers need to consider the impact of charges on their investment. These may be more than those from regulated investment products.
The U.K. regulator warned consumers concerning the different risks which are associated with cryptocurrency investments. “Consumers need to be wary if they are contacted out of the blue and forced to invest faster or promised high returns which sound too good to be true.” Consumers need to be fully aware of the risks and check if it is worth investing in high return investments depending on the crypto assets.