As long as there remains no uniform draft for regulating cryptocurrencies, it seems unlikely that there won’t be news surrounding this topic. It is especially prominent now as digital assets continue to be an important part of our financial system.
In the United Kingdom, regulators are turning their focus to the crypto space for the umpteenth time as they hope to finally get some form of regulation off the ground.
Expectations For An Increasingly Vital Space
Last week, the Financial Planning Committee (FPC) of the Bank of England shared a report with several other top financial regulators in the country in which it extensively detailed expectations for crypto regulations. The report discussed the market extensively, touching on topics such as mainstream asset regulation, financial stability for crypto, and concerns about decentralized finance (DeFi).
In its report, the FPPC also referenced agencies like the Financial Conduct Authority (FCA), along with the Prudential Regulation Authority (PRA) - another arm of the Bank of England. All agencies were called to address the crypto regulation issue, with the FPC stressing the need for quick and decisive action.
As the report explained, crypto assets and DeFi so far pose a limited risk to financial stability across the United Kingdom. However, the FPC also sees these risks growing as DeFi assets and cryptocurrencies become increasingly interconnected with the global financial system. Thus, it has committed to examining these risks and making proper recommendations.
Interestingly, the FPC explained that the existing regulatory framework for digital assets appears to be sufficient for handling the perceived risks of the market. This is especially true for areas where cryptocurrencies seemingly perform the same function as traditional finance. However, the FPC has also claimed that there’s a need for better regulation of stablecoins in the market.
As for DeFi, the agency recommended waiting for additional international collaboration to regulate this sector.
In its recommendation to financial institutions, the FPC counseled more cautious approaches and prudence as they adopt any digital assets or DeFi protocols. Until such a time as the regulatory framework is more robust, it would be better to approach these industries more carefully.
Maintaining Best Practices For Now
The other agencies mentioned also shared their insights on regulation for crypto and DeFi at the moment. In a letter to banks and other financial institutions, Sam Woods, the chief executive of the PRA, advised them to consider the currently existing policies and frameworks when interacting with crypto and DeFi.
The bulk of Woods’ letter focused on reminding these institutions of their regulatory obligations and the need for investor protection as crypto continues to grow and become a more integral part of customers’ financial lives. The CEO also asked for the completion of a survey examining organizations and their exciting crypto exposure and their plans for the current fiscal year.
As for the FCA, the agency reminds all regulated financial institutions to also be aware of their obligations when exposing themselves to cryptocurrencies. Companies are expected to be "clear with customers" on risk and regulation and maintain prudence and best custody practices.
All agencies have committed to building a draft of crypto regulation, which they hope to present in the coming months. However, considering how slow regulators have been on the crypto issue, we would most likely have to wait much longer for any draft to be released.
Registration Is Still Ongoing
For now, the FCA remains the recognized regulator fr cryptocurrencies in the United Kingdom. The agency has been looking to get all crypto firms in the country to register with it for some time now, and it appears to still be in the middle of a registration spree.
For the latest time, the FCA announced last week that it would extend the registration deadline for some crypto firms in the country. In a statement, the FCA claimed that a small number of firms would continue to cooperate under temporary operating licenses. While this doesn’t mean that the companies have been assessed and approved, it does give them some leverage as they work out their registration status.
So far, the FCA has approved the registration of 33 crypto companies. The agency also granted temporary registration statuses to 12 companies - including Copper, revolut, and CEX.IO. For now, no new deadline has been specified for these companies.