Government looks at introducing greater cryptoasset regulation

If you invest in cryptoassets, you may be aware that the Treasury is currently consulting on the best way to regulate a large number of cryptoasset activities.

In April 2022, the Government announced plans for a new regulatory regime for cryptoassets and is using the consultation to gather views on the best way to proceed.

Cryptoassets have become more commonly owned in recent years with the consultation noting that a majority of recent surveys show that 5-10% of UK adults now own cryptoassets, a significant increase over the past 1-2 years.

Given this increased holdings of cryptoassets, the Government are keen to understand how better to protect investors from the type of events which have led to such a turbulent year

Volatile times for cryptoassets

As stated in the Treasury Consultation, the total global market capitalisation of cryptoassets recently stood at around $0.8 trillion, which is roughly 75% below a peak of around $3 trillion in November 2021. The total valuation of cryptoassets changes daily, and this 75% fall represents a significant fall in value over a short period of time.

More safeguards for cryptoassets

Concerns regarding the unregulated nature of cryptoassets were heightened when FTX Trading Ltd., commonly known as FTX failed. The failure of FTX, a major crypto exchange, has raised important questions around conflicts of interest, market conduct and operational resilience.

The consultation is considering several changes to provide more safeguards, operational risk controls, data reporting arrangements, and good governance to give investors more protection.

Andrew Griffith MP, Economic Secretary to the Treasury, said, “Our objective is to establish a proportionate, clear regulatory framework which enables firms to innovate at pace, while maintaining financial stability and clear regulatory standards. This includes a proposal to bring centralised cryptoasset exchanges into financial services regulation for the first time, as well as other core activities like custody and lending.”

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Date published 7 Feb 2023 | Last updated 20 Mar 2024