Will the UK government’s attempts to regulate cryptocurrencies actually open the door for insurance brands to cover the risk? The potential loss for wealthy people is huge and when things go bad there is often a domino effect at play, as we saw with the FTX exchange, or the stock market crash back in 2008. Can you really insure an asset that only exists as a piece of code somewhere on a Starlink server system? How will insurers train their teams to understand a fast moving crypto/coin market and steer clear of well funded promo campaigns involving celebs, politicians or members of the WEF who have their own pet schemes?
There are also big questions on how UK regulators, or even EU regulators, will have any real power to take action against those bad actors based overseas in, shall we say, dubious countries. Proof of human regulatory breaches when AI is making the decisions on coin values is another grey area for the lawyers to argue over, ad infinitum most likely.
Here’s the elevator pitch from HM Gov;
Ambitious plans to protect consumers and grow the economy by robustly regulating cryptoasset activities have been announced by the government. Cryptoassets – commonly known as ‘crypto’ – are a relatively new, diverse and constantly evolving class of assets that have a range of potential benefits, as well as posing risks to the consumer.
As is common in emerging technology markets, the crypto sector continues to experience high levels of volatility and a number of recent failures have exposed the structural vulnerability of some business models in the sector. Our robust approach to regulation mitigates the most significant risks, while harnessing the advantages of crypto technologies. This enables a new and exciting sector to safely flourish and grow, boosting jobs and investment.
CUSTODIANS WILL BE GOVERNMENT GATEKEEPERS
Economic Secretary to the Treasury, Andrew Griffith said:
“We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes cryptoasset technology. But we must also protect consumers who are embracing this new technology – ensuring robust, transparent, and fair standards.”
Under plans set out by the government today (1 February), it will seek to regulate a broad suite of cryptoasset activities, consistent with its approach to traditional finance. 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.
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. As part of this approach, the consultation will seek views on improving market integrity and consumer protection by setting out a proposed crypto market abuse regime.
IT’S DEFINITELY NOT MONEY LAUNDERING, NOT AT ALL
In addition, to address industry concerns about the small number of Financial Conduct Authority (FCA) authorised cryptoasset firms who can issue their own promotions, HM Treasury is also introducing a time limited exemption. Cryptoasset businesses that are registered with the FCA for anti-money laundering purposes will be allowed to issue their own promotions, while the broader cryptoasset regulatory regime is being introduced.
This approach delivers on the original policy intention of the measure to promote innovation, enhance consumer protection and ensure that cryptoasset promotions can be held to equivalent standards as promotions of financial services products with similar risk profiles.
- Today’s consultation (published 1 February) will close on 30 April 2023, after which, the government will consider feedback and work to set out its consultation response. Once legislation is laid, the Financial Conduct Authority will consult on its detailed rules for the sector
- In April 2022, the then Economic Secretary, John Glen MP, set out ambitious plans for the UK to become a global hub for cryptoasset technology
- Today’s announcement delivers against these plans, positioning the UK as a safe jurisdiction for cryptoasset activity to take place, fostering innovation and providing firms clarity over the planned regulatory framework.
- The consultation builds on previous HM Treasury proposals, which focused on stablecoins and the financial promotion of cryptoassets
- Proposals are centred around a number of important cryptoasset activities – including exchange activities, custody activities and lending activities, which the government is intending to bring into the regulatory perimeter for financial services
- For each activity the consultation sets out key design features of the regime covering themes such as prudential requirements, data reporting, consumer protection, location policy and operational resilience
- The consultation paper also proposes regimes for a range of cross-cutting issues which apply across cryptoasset activities and business models, including market abuse and cryptoasset issuance and disclosures
- Future financial services regulatory regime for cryptoassets consultation – GOV.UK (www.gov.uk)
- Government approach to cryptoasset financial promotions regulation policy statement – GOV.UK (www.gov.uk)