- The public consultation process will seek views from the crypto industry and stakeholders on the regulation of crypto assets and stable coins
- There are over 30 proposals for cryptocurrency regulations, along with Decentralized Finance (DeFi) and native tokens
- The UK Treasury and regulators are taking a close watch on the regulatory trends of the other countries
UK Treasury seeks opinions of the industry and the crypto market stakeholders to device the regulations in the areas where most risk lie
HM Treasury has launched a 46-page consultation document seeking opinions of the stakeholders of cryptocurrency. The move came as a measure to take more suitable actions and make regulations in the cryptocurrency field.
The public consultation process will seek views from the crypto industry and stakeholders on regulating crypto assets and stable coins. The consultation document was released on January 7, 2021. The document refers to the existing regulations and will further describe the principles and purposes of the regulations and regulations on appropriate classification methods and operating systems for virtual currencies and stable coins.
There are over 30 proposals for cryptocurrency regulations, Decentralized Finance (DeFi) and native tokens for which the Treasury is seeking the people’s opinion. The British Government feels that stable coins are the community’s future and that they are prone to opportunities and risks. Hence, it is essential to make sound regulatory decisions as soon as possible.
The changing phase of the crypto market
To investigate the impact of cryptocurrency, the UK’s regulatory bodies had launched a task force in 2018. It was observed that the crypto market is still at a very nascent stage in the country and is in its infancy. On the other hand, the crypto market has been very deceptive and has seen a drastic change in the country. The situation is changing rapidly and especially for the stability of the financial system.
Also, the presence of stable coins payment can bring significant benefits to the capital markets. But that can be a risk. Even if there are opportunities in stable coins, then there are various risks also involved. Various design features maintain stable value but the opportunities and risks differ depending upon the design, scale of introduction and purpose of use.
Hence, in this consultation documents, stable coins are defined, classified according to the characteristics, according to the standards of the Financial Behaviour Supervision Organisation (FCA), and provides guidelines on whether they can be subject to regulation. The proposal also talks about the operators of stablecoins and reporting requirements. The regulators are using distributed ledger technology (DLT) in their design technology when defining stablecoin.
Scope and content differ in different boundaries
The UK Treasury and regulators are taking a close watch on the regulatory trends of the other countries. They are also watching the EU’s cryptocurrency regulation bill. In the consultation document, the Treasury has also mentioned what is the approach to be taken to align cryptocurrency regulations in the country along with regulations in other countries and the EU.
The purpose, principle, and scope of regulation were also defined in the consultation documents. The detailed requirements in the law were not specified. It will be discussed by the financial services regulators. The Treasury is also considering making the UK’s business establishments concerning the usage of stablecoins across borders. They are also seeking approval for companies seeking developing businesses for consumers in the UK.
Importance of consultation documents
The Ministry of Finance takes tremendous importance of the consultation document. The last date for the submission of the document is March 21. Based on the public and private partnerships’ responses, the Government will decide on the regulations to be put in the areas where the cryptocurrency could be used and where the most severe risks lie.
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