The UK government has confirmed its final proposals for cryptoasset regulation in the UK, including its intention to bring a number of cryptoasset activities into the regulatory perimeter for financial services for the first time. This document provides the government’s response to the consultation and call for evidence on the future financial services regulatory regime for cryptoassets, which was published on 1 February 2023 and closed on 30 April 2023. It summarises the feedback received by HM Treasury in response to the consultation, and details how this has influenced further development of the government’s approach.
The UK remains committed to creating a regulatory environment in which firms can innovate, while crucially maintaining financial stability and clear regulatory standards so that people can use new technologies both reliably and safely.
Original consultation
Summary
This consultation sets out proposals for the UK’s financial services regime for cryptoassets, and marks the next stage of the UK’s phased approach.
Consultation description
In April 2022, the government committed to introducing a new regulatory regime for cryptoassets, reflecting the risks and opportunities they present.
This consultation paper sets out proposals for this future regime and marks the next phase of the government’s approach to regulating cryptoassets. It builds on previous HM Treasury proposals, which focussed on stablecoins and the financial promotion of cryptoassets.
The proposals seek to deliver on the ambition to place the UK’s financial services sector at the forefront of cryptoasset technology and innovation and create the conditions for cryptoasset service providers to operate and grow in the UK, whilst managing potential consumer and stability risks.
The government’s proposed measures have been informed by recent market events – including the failure of FTX – which reinforce the case for effective regulation and sector engagement.
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Managing the failure of systemic Digital Settlement Asset (including stablecoin) firms
Detail of outcome
The government consulted on its approach to managing the failure of a systemic digital settlement asset (including stablecoin) firms by applying a modified Financial Market Infrastructure Special Administration Regime (FMI SAR) to such firms. Overall, respondents were broadly supportive of the proposed approach.
Some respondents sought clarity on how the FMI SAR would be applied in practice, especially with regard to the additional return or transfer of customer funds and custody assets objective.
As set out in the response, the government intends to lay regulations to implement the policy intent described in the consultation in due course and will provide further clarity on the operation of the modified FMI SAR by making insolvency rules.
Original consultation
Summary
Consultation description
This consultation sets out the government’s proposed approach to managing the failure of a systemic digital settlement asset (including stablecoin) firms, by way of the application to such firms of a modified Financial Market Infrastructure Special Administration Regime (FMI SAR).
In particular, we wish to receive your responses to the following questions:
- Do you have any comments on the intention to appoint the FMI SAR as the primary regime for systemic DSA firms (as defined at para 1.8) which aren’t banks?
- Do you have any comments on the intention to establish an additional objective for the FMI SAR focused on the return or transfer of customer funds, similar to that found in the PESAR, to apply solely to systemic DSA firms?
- Do you have any comments on the intention to provide the Bank of England with the power to direct administrators, and to introduce further regulations in support of the FMI SAR to ensure the additional objective can be effectively managed, or what further regulation may be required?
- Do you have any comments on the intention to require the Bank of England to consult with the Financial Conduct Authority prior to seeking an administration order or directing administrators where regulatory overlaps may occur?
Following the closure of the consultation, HM Treasury will consider respondents’ views and publish a consultation response.
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