The UK government has shared its plans to provide improved regulations for the crypto industry to check reckless practices, strengthen the operational resilience of players and ultimately protect users.
According to the press release from the government, the proposal spells out ambitious regulations for trading platforms, new token issuance, crypto lending, and many other subsectors of the nascent industry.
Undoubtedly, the year 2022 was difficult for the crypto space and it was characterized by the decline in market prices which was made worse by the crash of the Terra-Luna ecosystem, and the bankruptcy of players like Celsius Network, Three Arrows Capital (3AC), and lastly the fall of Sam Bankman-Fried’s $30 billion exchange FTX.
Therefore, the UK government is working on regulations to reflect the current market realities. To make this happen, it is introducing a crypto asset regulatory regime.
The government’s plan to regulate crypto activities is a reverse of an earlier plan to model regulation for the industry with standards applicable to stock, shares, and insurance products. Likewise, the aim is to create a new, more secure, more competitive financial system for crypto firms and also to treat crypto like other forms of financial assets.
Global Call for Regulation Following FTX Implosion
The FTX implosion and bankruptcy proceedings have served as an eye-opener for several entities including regulators and investors. As such, it has highlighted the need for the nascent crypto industry to expand to a level where it will receive the same coordinated regulatory procedures as other financial institutions.
Aside from the UK regulators’ plans, the financial regulators in Japan have also advised global policymakers to address cryptocurrencies like banks as well as tighten the regulation around the asset class just as it is done with traditional financial investments.
According to Mamoru Yanase, the Deputy Director General of Japan’s Financial Services Agency, the collapse of FTX was a result of a lack of supervision, weak governance, and the absence of proper guidelines, amongst others. Hence the need for stricter policy measures to prevent further occurrence of exchange failures.
Equally, Sir Jon Cunliffe, the deputy Governor of the Bank of England (BoE) for Financial Stability in an interview last year with Sky News said that crypto investors need protections so as to avoid future danger from the crypto market. In view of this, BoE is doing everything possible to ensure that the crypto industry is safe for investors.
