Invitation: public opinion on digital currency regulation invited by UK Finance Ministry

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The U.K. Ministry of Finance is inviting public comments on its draught regulations covering ‘crypto-assets and stablecoins.’ Known as Her Majesty’s Treasury, the Ministry has opened consultations on the legislation until March 21.

In its call for evidence, the Ministry stated that it intends to foster innovation and maintain the U.K.’s position as a world leader in financial technology, all while “maintaining the highest regulatory standards so that people can use new technologies reliably and safely.”

The United Kingdom. In the last three years, the Government has taken a range of steps to shield the public from digital currency exploitation. This include the clarification of the regulatory perimeter through the FCA and the communication of minimum policy expectations for stablecoins through the Bank of England and HM Treasury. It has also introduced the Fifth Anti-Money Laundering Directive (AMLD5) and restricted the selling of digital currency directives.

HM Treasury proposes a strategy in which impartial regulators establish and enforce regulations. This strategy would allow digital currency companies to continue to innovate and grow rapidly. It will also facilitate the incorporation of foreign regulations for particular niches in the sector, the Ministry said.

The proposed changes recommend an expansion of the regulatory perimeter in due time. HM Treasury admitted that the U.K. digital currency market is currently quite small, but growing rapidly. As this industry expands, the government is seeking to ensure that “their use does not threaten stability and safeguards are in place to avoid their use in illicit activities.”

“The government is therefore considering an approach in which the use of currently unregulated tokens and associated activities primarily used for speculative investment purposes, such as Bitcoin, could initially remain outside the perimeter for conduct and prudential purposes. […] Utility tokens – those used to access a service – would also remain outside the authorisation perimeter.”

The government suspects that stablecoins may pose a challenge to financial stability, customers and competing financial services.

“The government therefore proposes to first introduce a regulatory regime for stable tokens used as a means of payment. This would cover firms issuing stable tokens and firms providing services in relation to them, either directly or indirectly to consumers.”

The ideas were well received by some digital currency experts. Tim Swanson, Head of Business Analysis at the London-based financial infrastructure company Clearmatics, lauded the plans, saying that they were stronger than the US. Office efforts of the OCC. He cited the addition of the term Financial Market Infrastructure Principles (PFMI) as an indication that HM Treasury had “done its homework” on the market.

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