New Legislation on Crypto Staking and Stablecoins to be Implemented in the UK by July
The UK plans to roll out new legislation targeting crypto staking and stablecoins by July, as declared by Economic Secretary Bim Afolami at the Innovate Finance Global Summit in London. Afolami emphasized the government’s swift efforts to finalize and implement the regulatory framework.
He highlighted that the forthcoming legislation would, for the first time, bring a variety of crypto asset activities under regulation. These activities include operating cryptocurrency exchanges and managing the custody of customers’ assets, among others.
Afolami Intends To Put Forward Stablecoins Legislation “as soon as possible.”
The UK government’s announcement of nearly completed legislation follows its revised stablecoins regulations in October 2023. The regulations aim to reduce the risk of harm to consumers and address the conduct, prudential, and financial stability risks associated with stablecoins.
With an election anticipated later this year, the current Conservative government may encounter challenges in implementing its long-term financial regulatory plans for the cryptocurrency sector.
Presently, the Labour Party holds a significant lead over the Conservative Party, with polls from April 2024 indicating a 65% disapproval rating for Prime Minister Rishi Sunak. A staunch advocate for cryptocurrencies and a former analyst at Goldman Sachs, Sunak has been vocal about his ambitions to position the UK as a central hub for the cryptocurrency industry.
At a cryptocurrency event in February 2024, Afolami had previously indicated the government’s urgency in introducing stablecoins legislation, emphasizing the need to act swiftly.
The FCA Plans To Combat Market Abuse In The Cryptocurrency Sector
The UK government has quickly implemented several policies affecting the cryptocurrency industry, culminating in the passage of the Financial Services and Markets Bill (FMSB) in June 2023.
The UK’s Payment Service Regulator (PSR), an independent subsidiary of the Financial Conduct Authority (FCA), clarified that the act explicitly allows for the regulation of payment systems that handle stablecoins.
In March, the FCA announced its intention to tackle market abuse in the cryptocurrency sector by enhancing its market surveillance and developing sophisticated analytical tools.
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👤 @BimAfolami, MP and Economic Secretary to HM Treasury outlines that legislation is being developed to regulate #stablecoins and #staking, with plans to finalize proposals by their summer recess (🗓 July 24) 💥
Upon… pic.twitter.com/GAkBLWAbn4
— Subjective Views (@subjectiveviews) April 15, 2024
This recent regulation on digital assets by the UK coincides with efforts by US lawmakers to enact similar legislation concerning stablecoins.
US Representatives Maxine Waters (D-CA) and Patrick McHenry (R-NC) are leading these efforts. They are considering attaching stablecoins regulations to a larger, mostly unrelated legislative bill to garner bipartisan support.
However, it remains uncertain whether this legislative strategy will succeed before the US presidential election in November.
FATF Shows That Under 30% Of The World’s Jurisdictions Are Regulating The Crypto Industry
In February, the U.K. treasury outlined new regulations for the cryptocurrency industry, proposing that digital asset companies be regulated in the same manner as traditional financial institutions. The government aims to regulate the burgeoning sector while positioning Great Britain as a major global center for cryptocurrency.
The treasury highlighted in its announcement that its stringent regulatory approach reduces significant risks and capitalizes on the benefits of crypto technologies. This strategy is designed to allow the emerging sector to prosper safely, thus stimulating job creation and investment.
Despite these efforts, a significant portion of the cryptocurrency sector remains largely unregulated. A recent Financial Action Task Force (FATF) report indicated that fewer than 30% of global jurisdictions have implemented regulations for the industry.
T. Raja Kumar, head of the FATF, expressed that virtual assets tend to migrate towards less regulated areas, which can be exploited by criminals and terrorists for regulatory arbitrage. He emphasized the critical need for a strong regulatory framework across all jurisdictions to prevent such misuse.
Furthermore, a report last month from the FBI’s Internet Crime Complaint Center (IC3) revealed that in 2023, over 43,000 complaints were filed by Americans regarding cryptocurrency scams, with financial losses from such frauds and scams amounting to $3.9 billion, marking a 53% increase from the previous year.
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