Regulatory developments affecting cryptocurrencies are increasing in pace. Including the European Union, where MiCA received an upvote, and the United Kingdom. But as the former speeds forward, can the latter keep up?
As of January 1, 2021, the United Kingdom has officially left the European Union. The country is now free to set its own rules and regulations, including those related to cryptocurrency. This means that the UK government can formulate laws and regulations around the use of cryptocurrencies. And also determine how to deal with issues such as taxation, money laundering, and consumer protection. Here we compare the UK’s efforts with those of its previous bloc.
Play the encryption game
In fact, the United Kingdom has already taken steps to regulate cryptocurrencies even before leaving the European Union. In 2019, the Financial Conduct Authority (FCA) published key guidance. She explained that cryptocurrencies can be classified as “security tokens,” “electronic money tokens,” or “unregulated tokens,” depending on their characteristics and intended use.
The United Kingdom will certainly continue to develop its regulatory framework for cryptocurrencies. This may include further guidance from the FCA or new legislation. It is also possible that the UK will work with other countries to develop international standards. Will the nation struggle to catch up with the European Union in regulating cryptocurrencies, or bypass the EU altogether?
New encryption system
Last month, the European Union (EU) voted to develop a new framework for cryptocurrencies, the Market Regulatory in Crypto Assets (MiCA). With 517 in favor and 38 against, this legislation aims to provide a complete set of rules and regulations for digital assets. To enhance investor protection, market integrity and financial stability.
The MiCA framework will apply to all issuers, owners and service providers involved in cryptocurrency. Including exchanges, wallet providers, and token issuers. The framework will require these entities to comply with various disclosure and governance rules, capital requirements and customer protection rules. It will also put in place a licensing system for service providers that will be supervised by the national authorities.
The European Securities and Markets Authority, or ESMA, the executive branch of the European Union, leads the MiCA regulation. Once operational, all crypto service providers operating in the European Union must comply with its rules. or face penalties.
MiCA is the most detailed legal scheme for digital assets to date. The official blessing paves the way for MiCA to become law in 2024. The European Union has put it a step ahead of its previous member, the United Kingdom. While the US regulatory know-how lags behind.
UK Crypto Regulations
The UK needs to catch up with the EU in rolling out the regulatory framework for crypto assets. But now that the UK has left the European Union, it is free to set its own rules for cryptocurrency. Separate from the MiCA system established by the European Union.
The UK government said it was committed to an effective legal framework. It aims to protect consumers, promote innovation and stop financial crimes.
In a recent interview, City of London Secretary and Economics Secretary to the Exchequer Andrew Griffiths and expect The UK’s cryptocurrency regulatory framework will be rolled out within the next 12 months. This indicates that the UK government is busy developing its regulatory approach to digital assets. And make sure to do so in a timely manner.
Griffiths takes a tough stance on “high-quality” but “progressive” UK financial laws. financial news a report He says he expects “broader” rules than the EU will impose. He also predicts the emergence of a central bank digital currency (CBDC). and that the United Kingdom would take the lead in its development and launch. Although, given the complex technology and privacy issues, “it won’t happen overnight.”
The Financial Services and Markets Act (FSMB) is expected to become law in the spring. It will introduce new powers to HM Treasury (HMT) to bring crypto assets into the UK financial services space.
On February 1, 2023, HMT put out Her brief is about the legal system for crypto assets. (Other than the stablecoins indicated in the securities). This latest brief builds on previous discussions and conversations. Including the January 2021 paper focused on stablecoins.
It also adds to other proposals in the FSMB to introduce a regime to govern “digital settlement assets.” These are defined as fiat-backed stablecoins that are used for payments. Moreover, leaders like Binance own it in the field publicly praised it cipher regulation. The report added:
“We strongly believe that a stable regulatory environment helps support innovation and is essential to building confidence in the industry, as well as long-term growth.”
The UK Treasury has said it wants to make the country a hub for cryptocurrency. New rules are needed to restore confidence after a difficult 2022. The country’s need is growing as more people are becoming curious about the niche asset class. And again, a space plan can help weed out the bad.
London-based pressure group cryptokin a discussion with BeInCrypto, stated:
“With the adoption of MiCA, the EU has cemented its position as a regulatory leader for years to come. Although MiCA is not flawless, it is a closely related regulatory group that puts significant pressure on the UK and the US in terms of providing operational clarity for cryptocurrencies.”
spot the difference
It is still too early to say precisely how the UK’s cryptocurrency regulatory framework will differ from the EU’s MiCA, as the UK still needs to release full proposals. However, there are a few areas where the UK might choose to take a different path.
For example, the United Kingdom may be more friendly towards the cryptocurrency industry to promote innovation and attract investment. This could mean that the UK takes a more flexible stance on licensing and regulation or offers tax inducements to crypto companies.
On the other hand, the UK may also choose to be stricter in some areas. Such as Anti-Money Laundering (AML) and Terrorist Financing (CTF) laws.
Legal and industry experts have offered a range of opinions on how the UK’s cryptocurrency plan differs from MiCA’s.
Lawyers at law firm Norton Rose Fulbright shared an analysis with BeInCrypto. notice them He provides Comparison of some critical areas in MiCA and HMT proposals. It applies to players in the EU and UK crypto asset markets. Including service providers, issuers, large and small investors.
Some experts suggest the UK take a more principles-based approach, focusing on outcomes rather than prescriptive rules. Others suggest the UK may prioritize consumer protection and anti-money laundering and terrorist financing laws, given the commitment of its leaders to fighting financial crime.
However, the chairman of CryptoUK’s trade body, Ian Taylorasserts that the bill “imposes significant judicial pressure” on Britain and the United States to pass their frameworks.
“It is important to have a minimum global regulatory standard for the crypto industry, and MiCA serves as the standard here.”
In general, regulators are likely to seek a balance between supporting innovation and protecting the public. The United Kingdom is not part of the European Union. She will follow her own standards. Its cryptographic framework will evolve based on the needs of the industry and the broader economy.
Following the Trust Project’s guidelines, this featured article features opinions and perspectives from industry or individual experts. BeInCrypto is dedicated to transparent reporting, but the opinions expressed in this article do not necessarily reflect those of BeInCrypto or its employees. Readers should independently verify information and consult with a professional before making decisions based on this content.