UK Lawmakers Call for a Dedicated Government Role to Oversee Crypto Regulation

The crypto market has been growing rapidly in recent years, attracting millions of investors, innovators, and users around the world. However, the lack of clear and consistent regulation has also created challenges and risks for the industry, such as market manipulation, fraud, hacking, tax evasion, and money laundering.

To address these issues and promote the development of the crypto sector in the country, a group of U.K. lawmakers has proposed a bill that would provide a comprehensive regulatory framework for crypto assets and appoint a dedicated official to coordinate the government’s approach.

The bill, called the Crypto and Digital Assets All Parliamentary Group (APPG) Inquiry Report, was released on Monday after a 10-month inquiry that involved consultations with various stakeholders, such as crypto industry representatives, regulators, academics, and the general public.

The report made 53 recommendations on how to regulate crypto assets in the U.K., covering areas such as consumer protection, economic crime prevention, innovation and competition, central bank digital currencies (CBDCs), and international cooperation.

Some of the key recommendations include:

  • Creating a statutory definition for crypto assets and crypto asset securities and clarifying the roles and responsibilities of different regulators, such as the Financial Conduct Authority (FCA), the Bank of England (BoE), and the Advertising Standards Authority (ASA).
  • Establishing a de minimis exemption for crypto asset transactions for personal use.
  • Requiring crypto asset service providers to register with the FCA and comply with anti-money laundering (AML) and counter-terrorism financing (CTF) rules.
  • Requiring crypto asset transactions that are not recorded on a public distributed ledger to be reported to a registered trade repository within 24 hours to enhance transparency and reduce fraud.
  • Directing the BoE to issue a report on the feasibility and implications of creating a U.K. CBDC.
  • Directing the FCA to issue guidance on how existing financial services regulations apply to crypto assets and crypto asset securities.
  • Directing the FCA and the BoE to issue joint rules on market manipulation prevention and investor protection for crypto asset markets.

The report also suggested that the government should consider appointing a ‘Crypto Tsar’ who can help coordinate across different departments and agencies to ensure a consistent and coherent approach to crypto regulation.

The report’s chair, Lisa Cameron MP, said in a press release: “Given the rapid growth of cryptocurrency and digital assets, the timing of this report is vital to protect consumers whilst ensuring the U.K.’s leadership in this sector can be realised.”

The report’s vice-chair, Damian Collins MP, added: “Cryptocurrency is here to stay. It’s time we had a clear regulatory framework that protects consumers but also allows innovation in this space.”

The report has received positive feedback from some of the leading players in the crypto industry, such as CryptoUK, Coinbase, Fidelity Digital Assets, Square, Blockchain Association, Chamber of Digital Commerce, Coin Center, Digital Chamber PAC, Grayscale Investments, Kraken, Paxos Trust Company LLC., Ripple Labs Inc., Stellar Development Foundation., Wyoming Blockchain Coalition., among others.

However, the report still faces an uncertain future in Parliament, as it would need to gain support from both sides of the aisle and be approved by Prime Minister Rishi Sunak’s government before becoming law. Moreover, some lawmakers may have different views on how to regulate crypto assets or may oppose any regulation at all.

The report comes amid growing global scrutiny and regulation of crypto markets by various governments and agencies. For example, China has recently cracked down on crypto mining and trading activities; India has proposed banning private cryptocurrencies; Japan has tightened its oversight of crypto exchanges; and the U.S. has sued Binance over securities violations.

The U.K. has also taken some steps to address crypto-related issues in recent months. For instance, the FCA has required crypto companies to register with it if they want to operate in the country; HM Revenue & Customs has issued guidance on crypto taxation; and several states have enacted or proposed their own crypto laws.

However, many in the crypto community have argued that the U.K. lacks a comprehensive and coherent approach to regulating crypto assets and that this creates uncertainty and confusion for both investors and innovators. They have also warned that the U.K. risks falling behind other countries that are more supportive of crypto innovation.

The report introduced by Cameron and Collins could potentially change that and provide a clear and consistent framework for the crypto industry in the U.K. If passed, the report could boost the confidence and adoption of crypto assets in the country and pave the way for more innovation and growth in the sector.

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