The United Kingdom’s His Majesty’s Treasury (HMT) has just announced the legal framework for cryptocurrency assets. This strategic move aims to promote the development of a transparent and secure digital currency environment in the UK.
According to Brian Quintenz, a senior figure at a16z Crypto, a renowned venture capital firm, the announcement signals the UK’s commitment to fostering an open, well-regulated, and technologically advanced capital market that embraces the potential of cryptocurrencies and blockchain technology.
In the announcement by His Majesty’s Treasury, key aspects will be focused on, including the elimination of cryptocurrency airdrops outside the token issuance scope. This means that the transfer of digital assets from a cryptocurrency project to multiple wallets will be restricted to prevent misuse for fraudulent purposes. Additionally, the HM Treasury (HMT) will classify NFT trading activities as non-financial services, emphasizing the need for clearer regulations to protect investors amidst the increasing complexity of virtual assets.
Quintenz suggests that the UK government’s approach to decentralized finance (DeFi) reflects a cautious yet progressive mindset. The HMT acknowledges the potential role of DeFi in financial services as the virtual currency sector expands, and blockchain-based solutions become more widely adopted in traditional finance.
Clearly, the HMT has an open approach to virtual assets, signaling positive developments in international legal processes. Furthermore, the government is actively exploring the potential benefits of Distributed Ledger Technology (DLT) in the financial market infrastructure and more efficient debt management.
The HMT’s legal framework is expected to establish a suitable and clear legal environment, allowing all entities in the cryptocurrency economy to maintain financial stability and control risks effectively. This legal framework will be implemented in the UK based on the Financial Services and Markets Act introduced in 2000 (FSMA), leveraging the established confidence and clarity in capital regulations over the years.
The HMT’s regulatory framework is subject to consultation and stakeholder engagement. The government will carefully consider the responses and issue further technical consultations on specific rules. An engagement group, chaired by the Economic Secretary to the Treasury, will facilitate ongoing dialogue with key industry participants, ensuring their insights inform establishing a clear regulatory framework that supports innovation and consumer protection.
Prior to this, the cryptocurrency industry had complained about delays and poor feedback from the UK Financial Conduct Authority, and recent regulations limiting cryptocurrency introductions have led some prominent companies to completely cut services in the United Kingdom.