On Thursday, the United Kingdom government announced that the Financial Services and Markets Act 2023 reform bill had received Royal Assent from King Charles, officially becoming a law. As per this new legislation, cryptocurrency trading is now recognized as a regulated financial activity.
The revised Financial Services and Markets Act categorizes crypto assets as “cryptographically secured digital representation of value or contractual rights” and considers them regulated financial instruments, products, or investments.
The UK government hopes to rocket-boost the economy by introducing a clearer path to regulation for new financial products. As part of the bill’s formulation, amendments have been introduced to regulate crypto as a financial activity and oversee promotions and advertising related to it. Additionally, payment regulations will also cover stablecoins under this bill’s purview.
This legislation could potentially attract more crypto businesses to the United Kingdom from the United States, where the industry is currently facing numerous lawsuits aimed at pushing them out through aggressive measures.
This reform brings about a significant change by providing regulators with a secondary objective of considering the UK’s international competitiveness while making regulatory decisions. Overly cautious regulatory decisions in recent months have been subjected to criticism, causing concerns about the City’s decline in comparison to other financial centers.
The act aims to compel regulators to take into account the global standing of the City, thereby fostering a more innovative financial sector. This move has garnered appreciation from several prominent figures in the financial industry.
While the government proposed measures to enhance accountability, apprehensions about the insufficiency of these measures were raised during the act’s passage through parliament, considering the breadth of powers that regulators would now possess.
Responding to these concerns, the government introduced proposals that require regulators to provide a quarterly review of their performance. Additionally, new cost-benefit analysis panels would be established within the regulators to scrutinize individual decisions.
One of the areas where apprehensions about London’s position have been most significant is in capital markets. Several firms have either ruled out a listing in London or hinted that they may shift from the City’s indexes.
To address these concerns, the act eliminates restrictions on how specific shares are traded. For instance, the share trading obligation that mandates investors to trade on certain markets will be eliminated, while limits on the volume of certain types of trading will also be decreased. Pretty cool, huh?
The act marks the first instance of crypto being acknowledged as a regulated financial activity in the UK, aligning with the government’s goal to establish the country as a crypto hub.
The proposals concentrate particularly on fiat-backed stablecoins and aim to permit suitably regulated stablecoins to be utilized as a payment mechanism.
The Treasury is soliciting further opinions on the most effective approach to crypto regulation, with the primary regulations anticipated to be announced early next year. The FCA has recently outlined its strategy for crypto marketing and is intensifying consumer protection measures.
The government has emphasized Solvency II reforms as one of the significant areas. As per government estimates, these changes, which pertain to the insurance sector, will create around £100bn in supplementary investment.
The PRA announced the first set of proposals for the new Solvency UK regime, which will enable greater flexibility in capital requirement calculations and transition to a more principles-based system of evaluating firms’ internal models.
- Lucy Walker is a journalist that covers finance, health and beauty since 2014. She has been writing for various online publications.
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