November 1, 2022

UK Passes Bill to Recognize Crypto as Regulated Financial Instruments

UK Passes Bill to Recognize Crypto as Regulated Financial Instruments

  • UK legislators green-lighted a proposed bill that seeks to legitimize crypto assets by recognizing them as regulated financial instruments.
  • However, the proposed bill is yet to be enacted as a law, as it will still have to be approved by the House of Lords and receive royal approval from King Charles III. 
  • The bill was introduced during the time when the current prime minister, Rishi Sunak, was the country’s finance minister in the Boris Johnson-led administration.

In what could be defined as one of the most significant moments for the crypto world in 2022, UK legislators voted to recognize crypto as regulated financial instruments and products in the country last week. 

Introduced by Parliamentarian Andrew Griffith, the proposed bill seeks to establish a framework for the ongoing regulation of digital assets and extend payment rules to stablecoins as well.

This is how it went: the lower house of the Parliament voted to add digital assets to the scope of activities to be regulated via the proposed Financial Services and Markets Bill. 

Known as the House of Commons, the lower house had a line-by-line reading of the proposed bill, which broadly covers the UK's post-Brexit economic strategy. 

Speaking on the proposed bill, Mr. Griffith said, "The substance here is to treat them (crypto assets) like other forms of financial assets and not to prefer them, but also to bring them within the scope of regulation for the first time." 

Quite a way to go, yet

This crypto provision in the bill depends on the definition of a crypto asset included by a new clause 14. Under this, the authorities can regulate crypto promotions and outlaw those crypto companies that are not authorized to operate in the country.

Griffith further said that the Treasury would be consulting on its approach with industry stakeholders before it uses its power to ensure the framework reflects the unique benefits as well as risks posed by crypto activities. 

According to Griffith, the inclusion of crypto in the bill will ensure the country's Treasury is equipped to respond quickly to the developments made in the crypto sector. 

Moreover, the Treasury will also work on delivering regulation in an "agile" way, in accordance with the country's broader approach to regulating the financial services sector, he added.

That said, the bill is yet to be passed into law as it will be next sent to the upper house of the Parliament, the House of Lords. The amendments will then be given a final consideration and finally go before King Charles III for royal approval.

This latest development comes as the country welcomes Rishi Sunak's appointment as the UK's new Prime Minister. The markets bill was actually introduced during Sunak's time as finance minister in the Boris Johnson administration.

The former Chancellor of the Exchequer, Sunak, is known for his crypto friendliness as earlier this year, he said, "It's my ambition to make the UK a global hub for crypto asset technology."

The leader of the Conservative Party also commissioned the Royal Mint to create a non-fungible token (NFT), saying at the time, "We want to see the businesses of tomorrow — and the jobs they create — here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term."

According to Sunak, this is the part of the plan that will ensure the financial services industry of the UK is "always at the forefront of technology and innovation." 

He has also talked about crypto's potential to provide exciting new opportunities by offering people new ways to transact and invest while ensuring consumers are protected.

However, the 42-year-old investment banker-turned-politician is a long-time proponent of the Central Bank Digital Currencies (CBDCs) and has also set up a task force to lead the UK's work on a digital fiat, CBDC.  

Many from the crypto world have also called out those celebrating because of Rishi Sunak’s crypto affinity by saying that he is “CBDC-friendly” and not “crypto-friendly,” as portrayed. Whatever may be the truth, it would be interesting to see how the UK’s policies under the new PM impact crypto in the coming days.