UK Treasury drawing up new rules to police cryptocurrency markets | Cryptocurrencies
Cryptocurrencies will be regulated similarly to other financial products under legislation that will come into force in 2027.
The Treasury is drawing up rules that will require crypto companies to meet a set of standards overseen by the Financial Conduct Authority (FCA).
Ministers have sought to overhaul the crypto market, which is growing in popularity as a method of depositing and making payments.
Cryptocurrencies are not subject to the same regulation as traditional financial products such as stocks and shares; This means that in many cases consumers do not enjoy the same level of protection.
The government said the new rules will make the crypto industry more transparent, increase consumer confidence and make it easier to detect suspicious activity, impose sanctions and hold companies accountable.
Chancellor Rachel Reeves said: “Bringing cryptocurrencies into the regulatory framework is a crucial step in securing the UK’s position as a world-leading financial center in the digital age.
“By giving firms clear rules, we are giving firms the certainty they need to invest, innovate and create high-skilled jobs in the UK, while ensuring million-strong consumer protections and keeping dangerous actors out of the UK market.”
Crypto companies, which can include cryptocurrency exchanges and digital wallets, are required to register with the FCA if they provide services that fall under the UK’s anti-money laundering regulations.
The changes put forward by the Treasury would bring companies offering crypto services under the FCA’s purview and would mean the services would be regulated in the same way as other financial products, including being subject to transparency standards.
City of London Minister Lucy Rigby said: “We want the UK to be at the top of the list of crypto asset firms looking to expand, and these new rules will give firms the clarity and consistency they need to plan for the long term.”
The cryptocurrency market has experienced turbulence amid growing investor fears of a potential AI bubble.
Banking industry data in October showed that the amount of money lost by UK consumers to investment scams rose by 55% in a year, with fake cryptocurrency topping the list.
A Chinese woman living in the UK was convicted in September over a multi-billion pound Bitcoin scam.
Zhimin Qian, also known as Yadi Zhang, ran a scam that left 128,000 people in China out of pocket between 2014 and 2017. The 45-year-old hid the proceeds in bitcoin but UK authorities made a breakthrough in the case in 2018 when they raided a Hampstead mansion and seized Qian’s devices holding 61,000 bitcoins, worth more than £5bn at current prices.
The Metropolitan police believe this is the largest cryptocurrency seizure in the world. Qian pleaded guilty at Southwark Crown Court on Monday to criminal purchase and possession of cryptocurrency.
Ministers are also preparing plans to ban political donations made in cryptocurrency due to concerns that their origin and ownership are difficult to determine.
Nigel Farage’s Reform Britain, which this year became the country’s first party to accept contributions in digital currency, is believed to have received its first recordable donations in cryptocurrency this autumn. It set up a crypto portal to receive contributions and said it was subject to “enhanced” controls.
This month, Reform received £9 million from Christopher Harborne, a Thailand-based cryptocurrency investor and businessman; this was the largest donation made by a living person to a British political party.
