The UK has issued a public-private sector group in report, in which its argues that the country can be a hub for crypto innovation, but only if the right regulatory framework is in place.
On June 5th, the All-Party Parliamentary Group (APPG) on Crypto and Digital Assets published a report entitled “Realizing the Government’s Vision for the UK to Become a Global Hub for Cryptocurrency & Fintech Innovation”.
While not a formal arm of Parliament, the APPG offers an important conduit for directing key policy discussions that can influence parliamentary action, according to a blog by Elliptic.
The APPG features a private sector advisory board and it routinely seeks evidence from private sector participants to inform policy discussions on crypto assets.
The newly-issued report is the output of an inquiry into crypto assets that the APPG and Dr. Cameron held across 2022.
The report makes a clear and bold claim: it argues that it is in the interest of the UK to foster innovation in the crypto space in order for the country to retain its position as a leader in financial services.
However, it argues that this can only be achieved if regulations ensure consumers are protected in crypto markets and if risks arising from crypto related to challenges such as financial crime and financial stability are adequately addressed.
According to the report, a well-regulated crypto industry can offer the UK benefits such as new jobs, financial sector and economic growth, and greater financial inclusion.
Recommendations for policymakers
To achieve those aims, the report offers dozens of recommendations for policymakers in the UK to consider.
Among those are suggestions that law enforcement and regulatory agencies should work to increase information sharing with the crypto industry about financial crime typologies and risks to better enable the UK to ensure the disruption of crypto-related crime.
The APPG’s report comes as the government under Prime Minister Rishi Sunak has expressed its intention that the country should serve as a global hub for crypto innovation.
The UK’s HM Treasury is currently consulting on a future regulatory regime for crypto assets, and important amendments to the UK’s Financial Services and Markets Bill are working their way through Parliament that would have important implications for crypto-related consumer protection measures.
It would set out a framework for the oversight of stablecoin arrangements, among other things. The APPG’s recommendations suggest that these policy efforts to bring crypto within the scope of financial services regulation are on the right track.
Not all in the UK agree, however.
Some members of Parliament have argued that crypto should be regulated as gambling given the risks to consumers.
While the government maintains that it has no intention to do so and will persist in its efforts to use financial service regulation to oversee crypto markets, it is clear that there is not yet policy consensus among all UK policymakers.
To that end, the APPG’s views could prove important in shaping the ongoing debate there.
The APPG’s report also landed just days before the UK’s Financial Conduct Authority (FCA) released rules related to the financial promotion of cryptoassets, which will govern how crypto firms can advertise their products and services to investors in the UK.
The crypto industry has been anxiously awaiting the FCA’s rules on promotions because the scope of those rules could determine whether crypto firms find the UK an attractive place in which to do business.
- The rules – which will come into effect on October 8th of this year – will require that crypto businesses:
- Include personalised risk warnings in their communications to customers about the losses they could face when investing in crypto;
- Do not offer incentives to consumers – such as refer a friend schemes and other rewards – that could entice them to invest in high-risk crypto products they would otherwise not be inclined to invest in;
- Apply appropriateness tests to their promotions of crypto products and services to ensure that communications adequately convey the risks to investors.