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‘It would be premature and ineffective for the UK to regulate DeFi activities currently’, says Treasury

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In a detailed response document to the consultation on a future UK financial services regime for cryptoassets, the Treasury has confirmed various items, including:

  • the list of ‘specified investment’ in Part III of the Financial Services and Markets Act 2000 (Regulated Activities) Order, SI 2001/544, will be expanded, requiring businesses undertaking relevant activities involving cryptoassets to be authorised by the Financial Conduct Authority;
  • the future regulatory regime will generally apply to natural or legal persons undertaking one of the regulated activities by way of business and providing a service in or to the UK;
  • disclosure documents will be required for all cryptoassets made available for trading on a UK ‘venue’, rather than different requirements for well established and more recently launched tokens;
  • the UK government does not intend to ban decentralised finance. Regulation will be required, but the Treasury does not intend to rush ahead, noting that ‘it would be premature and ineffective for the UK to regulate DeFi activities currently. Instead, the government will support efforts at the international level through work at both the Financial Stability Board and standard setting bodies to inform a future domestic framework’; and
  • the Treasury is ‘accelerating exploratory work’ on the future regulatory treatment of staking in the UK. This will involve developing a clear definition of cryptoasset staking on a proof of stake (PoS) blockchain and distinguishing this from other riskier activities, establishing a taxonomy of the different PoS staking business models currently in the market, and identifying how to mitigate the associated risks and take advantage of the potential benefits of a carefully defined, permitted form of staking in the UK.

The Treasury has also published an update setting out the government’s legislative approach for bringing fiat-backed stablecoins into the UK’s regulatory perimeter for financial services (fiat-backed stablecoins include stablecoins that seek to maintain a stabilised value of the cryptoasset by reference to one or more specified fiat currencies – in other words, their value is linked to the value of real-world, government-backed currencies).

Issue: 1639
Categories: News