Posted by Afther Hussain in Uncategorized

These other stablecoins and wider unbacked cryptoassets will still be permitted for use in payment chains — however, they will remain unregulated. HMT and the FCA are considering disclosure rules to ensure consumers adequately understand this. There is likely to be an exception for reverse solicitation, for example, if a consumer (of their own volition) reaches out to a non-UK based crypto exchange. However this is likely to be limited as the new financial promotions regime would restrict the ability of non-FCA registered crypto exchanges to market and advertise their services to UK crypto consumers. “We have been clear on the need for the financial promotions regime to be extended to cover cryptoassets. Cryptoasset businesses marketing to UK consumers, including firms based overseas, must start getting ready now for this regime,” said the FCA.

1IOSCO defines DeFi as “the provision of financial products, services, arrangements and activities that use DLT to disintermediate and decentralise legacy ecosystems by eliminating the need for some traditional financial intermediaries and centralized institutions”. As such, DeFi allows for user-directed, non-custodial economic transactions via smart contracts.2Layer 1 staking is when a participant `locks up’ cryptoassets for a set period of time to help support the operation of the blockchain. Blockchains https://www.xcritical.in/ that have consensus mechanisms based on proof-of-stake, require validators or `stakers’ to provide capital (generally in the form of the blockchain’s native token) to the public network. These `stakers’ are incentivised to do so as they receive fees and newly minted tokens as a reward for producing new blocks and securing the network, proportional to the amount they have staked. This process also disincentivises bad actors from acting against the interest of the system as their own capital is at risk.

Cryptocurrency: UK Treasury to regulate some stablecoins

It seems HMT is trying to achieve a delicate balance in the cryptoasset market between supporting innovation while protecting consumers. The second policy objective of the framework is to `enable consumers to make well-informed decisions, with a clear understanding of the risks involved’ — markedly not to `protect consumers’. Under the proposed HMT framework, all firms undertaking the specified cryptoasset activities would need to become FCA authorised and so comply with FCA principles, which from July 2023 would include the new Consumer Duty principle. Under this new principle authorised firms must act to deliver good outcomes for retail customers. Professional intermediaries would also need systems and controls to prevent market abuse including submitting STORs to trading venues. HMT is also proposing that all regulated firms undertaking cryptoasset activities would be required to disclose inside information and maintain insider lists.

At all times, firms remain responsible for identifying and managing potential risks related to cryptoassets. All FCA regulated firms must observe our Principles for Business, which all firms must comply with to be authorised by us. As part of these protections, the FCA’s Client Assets Sourcebook (CASS) provides detailed rules for firms to follow when holding regulated assets in custody, as part of their investment business.

In February 2022, following Russia’s invasion of Ukraine, the UK joined other Western countries in imposing sweeping sanctions against Vladimir Putin’s regime. In March 2022, the UK Office of Financial Sanctions Implementation (OFSI), the Financial Conduct Authority (FCA), and the Bank of England released a joint statement reminding cryptocurrency service providers of their responsibility to contribute to sanctions enforcement. Although it has left the EU, it is likely that UK cryptocurrency regulations will remain largely consistent with the bloc in the short term. The UK will implement, for example, directives equivalent to the EU’s Markets in Crypto-assets (MiCA) and E-Money proposals, along with various AML directives.

HMT is seeking views on what information is available and would be useful for investors/consumers to assess the environmental impact of their investment decisions. If a firm wants to carry out these activities, then it must be authorised under FSMA and have permission to do that activity. The proposals will also strengthen the rules around financial intermediaries and custodians – which have responsibility for facilitating transactions and safely storing customer assets. These steps will help to deliver a robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms.

Currently AML regulations for cryptoassets vary considerably between jurisdictions, with a number of jurisdictions yet to implement international standards set out by the Financial Action Task Force (FATF). Through third-party intermediaries who safeguard the cryptoassets on behalf of the consumer cryptocurrency regulation in the UK (akin to banks). These platforms have made the cryptoasset technology more accessible to everyday users. Those marketing cryptoassets to UK consumers will need to introduce a cooling-off period for first time investors from 8 October 2023, under new advertising rules announced by the FCA.

Government activity

Firms should assess the risks posed by a customer whose wealth or funds derive from the sale of cryptoassets, or other cryptoasset related activities, using the same criteria that would be applied to other sources of wealth or funds. One way cryptoassets differ from other sources of wealth is that the evidence trail behind transactions may be weaker. This does not justify applying a different evidential test on the source of wealth and we expect firms to exercise particular care in these cases. The Government’s view is that cryptoassets and the activities underpinning their use should follow the standards expected of other similar financial services activities, and so will use the framework of the Financial Services and Market Act (FSMA) to regulate crypto assets.

• They also estimate that hundreds of millions of pounds are likely laundered via over-the-counter crypto brokers and professional money launderers have widely adopted cryptoassets to facilitate crime.
• Sir Jon Cunliffe told the BBC that if the value of cryptocurrencies fell sharply, it could have a knock-on effect.
• Fluctuations in the market make it harder for companies to accept cryptoassets as payment for goods and services; the price of a cryptoasset can vary considerably, even hourly.
• At all times, firms remain responsible for identifying and managing potential risks related to cryptoassets.
• Importantly, the custody of FBS issued outside the UK will not be captured — nor will self-custody activities.
• Wild fluctuation in the value of some digital currencies has led regulators to warn they pose risks.

Stablecoins are designed to have a stable value linked to traditional currencies or assets like gold. So-called “stablecoins” will become recognised forms of payment to give people confidence in using digital currencies, it said. The International Organization of Securities Commissions (Iosco) – an umbrella group of regulators from 130 jurisdictions – made the recommendation as part of the first set of international guidelines for crypto regulation. Any changes made can be done at any time and will become effective at the end of the trial period, allowing you to retain full access for 4 weeks, even if you downgrade or cancel. Expert insights, analysis and smart data help you cut through the noise to spot trends,
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Consumer protection

Recent research suggests Bitcoin now generates carbon emissions comparable to the country of Greece. Cryptocurrencies are virtual or digital currencies that can be traded or used to buy goods and services, although not many shops accept them yet and some countries have banned them altogether. The Treasury also said it planned to consult on regulating a much wider range of digital currencies later this year, without saying which they might be. After recent scandals in the crypto sector, the Treasury has downplayed its significance in Britain’s efforts to find growth. Change the plan you will roll onto at any time during your trial by visiting the “Settings & Account” section.

The UK Government is consulting on a proposed regulatory framework for cryptoassets with the aim of encouraging growth and innovation in the sector while maintaining financial stability and clear regulatory standards. This consultation follows the proposals in the Financial Services and Markets Bill (FSMB) to bring “digital settlement assets” used for payments (i.e. stablecoins) within existing e-money regulations. In summary, a number of new specific cryptoasset regulated activities will be created based upon similar traditional financial regulated activities. This is likely to mean that crypto native firms (those firms whose business is primarily in cryptoassets) will need to become fully authorised and supervised by the FCA. Existing traditional finance or `tradfi’ firms will be able to expand their permissions to undertake cryptoasset activities.

The participants (nodes) who solve the computational puzzle receive some Bitcoin as a reward for contributing their computing power to the Bitcoin network. As transactions are time-stamped on the blockchain and mathematically related to the previous ones, they are irreversible and impossible to alter. ‘Consumers should still be aware that crypto remains largely unregulated and high risk. Our rules give people the time and the right risk warnings to make an informed choice.

Matthew Long, the director of digital assets at the FCA and a member of Iosco’s crypto taskforce, said he acknowledged the Treasury committee’s concerns, but international coordination was key to addressing many related risks. MPs also warned that treating crypto like a traditional financial asset and regulating it via the FCA risked creating a “halo effect” that could lead consumers to believe the industry was “safer than it is” or that they were protected from financial losses, when they were not. The move follows a year of acute turbulence in the digital asset industry, which included the collapse of Sam Bankman-Fried’s FTX cryptocurrency empire and lender Celsius, which left individuals globally with billions of dollars in frozen funds. Our 2018 Dear CEO letter gave firms guidance on how to achieve best practice where clients and customers may be using cryptoassets, or providing services to customers offering cryptoassets.

It is, therefore, striking that there is no mention of how the proposed framework will interact with the expectations of the FCA’s Consumer Duty principle, especially given the high level of retail participation in the cryptoasset markets. Therefore, the trading venue would be expected to have systems and controls to prevent, detect and disrupt market abuse (e.g. KYC requirements, order book surveillance, use of blockchain analytics). Trading venues would need to investigate and sanction individuals, for example through the use of public blacklists. The FCA regulates financial firms providing services to consumers and maintains the integrity of the financial markets in the United Kingdom.

These proposals will place responsibility on crypto trading venues for defining the detailed content requirements for admission and disclosure documents – ensuring crypto exchanges have fair and robust standards. Ambitious plans to protect consumers and grow the economy by robustly regulating cryptoasset activities have been announced by the government. HMT previously confirmed that it intends to address the regulation of FBS as Phase 1 of its approach and address the regulation of wider cryptoasset activities as Phase 2. They will apply to all “cryptoasset activities provided in or to the UK”, meaning that… More than a trillion dollars has been wiped off the global cryptocurrency market capitalisation so far in 2022, according to CoinGecko data, as major central banks have raised interest rates, prompting investors to ditch riskier assets. Issues such as processing capacity and their mining’s vast energy consumption, still need to be resolved.

If hackers can determine some of your non-cryptoasset related personal information, even if it is your name and address, they may be able to infiltrate your transactions in that space regardless, for example through phishing attacks. The fact that cryptoassets are considered difficult to hack does not mean that it’s necessarily a safe investment. A blockchain is a series of blocks that records data with timestamps so that the data cannot be changed or interfered with. This technology along with users’ constant review of the system have made it difficult to ‘hack’ cryptoassets. Sometimes users will pay more in transaction fees in order to get their transactions processed more quickly. This means that, in some cases, cryptoasset transactions will not be as cost effective or as efficient as transactions done through a government issued currency.