- Industry leaders expect new crypto laws to be in place after the summer.
- Lawmakers in the House of Lords approved the Financial Services and Markets Bill earlier this week, and new regulations could be in place before the end of the year.
- The crypto community is “bullish” about the new regulations for a number of reasons.
UK crypto firms expect the government to soon ratify new laws for the industry after a new financial markets bill passed the upper house of parliament this week.
“I expect this to move quickly as, driven by PM Rishi Sunak, the current government is keen to see it implemented,” said Hirander Misra, chairman and founder of Zero13, a venture by multi-asset trading company GMEX Group.
Prime Minister Sunak has pledged to transform the nation into a crypto hotbed as part of his overall ambition to ensure the UK’s tech supremacy. Key in this push is the introduction of updated laws to regulate financial markets.
The industry’s bullishness comes after the House of Lords approved the Financial Services and Markets Bill this week, which puts it into the final stage before being passed by parliament. Pending a final stamp of approval from the House of Commons, the bill may already come into force after the summer, according to some Westminster watchers.
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Introduced in July, the bill has been championed by the government as a way to reap the benefits of Brexit by casting off the shackles of old European Union laws. While the FSMB is concerned by strengthening Britain’s financial competitiveness in general, it would also introduce new rules for crypto in general and stablecoins in particular.
The bill lays down legal certainty for the new asset class, sets a precedent for how to define crypto, and hand regulators more oversight over the sector.
A new definition for crypto assets
The crypto community has overwhelmingly welcomed the bill. Giving financial regulators more ownership over the rules they create for firms is “one of its biggest reforms” of the bill, says Andrew Whitworth, policy director for Europe, Africa and the Middle East at blockchain payment firm Ripple. He is also a member in the committee steering the Digital Pound Foundation, where Ripple is one of the founders.
The FSMB aims to spruce up the 23-year-old Financial Services and Markets Act, which “is no small step,” according to Jordan Wain, UK policy lead at blockchain analytics firm Chainalysis, told DL News.
While the bill represents a broad new strategy for financial services, it is a big deal for crypto as it establishes a definition for crypto assets in the UK, he said.
‘I may be bullish, but I can see a scenario where this is passed into law by the autumn’
— Hirander Misra
“The intent is that the sector will be considered in a financial services context and regulated as such,” Wain said. That will open up the door for regulators to oversee the “full suite of powers” previously outlined, including financial promotions.
This definition of crypto assets has set a precedent as it has been used in other governmental crypto reports over the past year since the FSMB was published.
New regulatory powers
The bill will also create new provisions for regulating stablecoins. Up until now, all UK-based crypto companies have been required to register with the Financial Conduct Authority by complying with its anti-money laundering provisions.
If passed, the bill will force entities issuing fiat-backed stablecoins to be regulated by HM Treasury and the FCA.
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Together, the two institutions will establish a regime to supervise stablecoin issuers and service providers, where firms will need to rise up to similar standards as other financial services.
“While inevitably a greater compliance burden for firms, the hope is that it will help mitigate some potential risks and harms to consumers and encourage further growth and investment into the UK digital asset sector,” Wain said.
The impact on the use of blockchain, the technology underlying crypto assets, would be also bolstered by the FSMB.
“Included in the new powers is the ability to create a regulatory sandbox for financial markets infrastructure which should boost the adoption of [decentralised ledger technology] in UK financial services,” Isabella Chase, senior policy advisor at blockchain intelligence firm TRM Labs, told DL News.
For regulators, the legislation peels away some of the risks associated with the sector by bringing them deeper into the regulatory scope. According to Sean Kiernan, CEO of digital merchant banker Greengage, this will make it easier for new entrants to enter and engage with the market.
New laws this year
Despite the bill being approved by the House of Lords, its passing is still not a foregone conclusion. The bill ultimately relies on King Charles’ approval, the final step in British lawmaking known as “royal assent.” With the sovereign’s signature blotting the bill, it will be a matter of months before the legislation comes into effect.
Before the king will ink the bottomline, the bill must first head back for debate in the lower parliamentary chamber to review the final touches from their counterparts in the House of Lords.
There is a chance that could happen “before the UK Parliament goes on its summer break after 20 July,” said Chase. Otherwise, it would have to wait until the next sitting on 4 September, she noted.
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“I may be bullish, but I can see a scenario where this is passed into law by the autumn,” Misra added. “This is especially the case as the government wants to show progress ahead of the next general election and that essentially gives them over a year to demonstrate this.”
The new laws could springboard the UK in the global race for crypto regulation.
When enforced, industry would be keen “to see immediate benefits and opportunities” similar to the borderless exchanges that were possible before Brexit “albeit with new international partners,” said Jamie King, head of compliance at fintech firm Freemarket.
Have a tip on UK crypto regulation? Contact the authors at inbar@dlnews.com and joanna@dlnews.com.
