UK Market Bill seeks to treat Crypto as new financial asset class
The new ‘UK Market Bill’ has been submitted to Parliament, which sets out new legislation for cryptocurrencies to be treated as a financial asset class.
The bill has called for existing rules for banking and payment processing to be modified and expanded to cover new cryptocurrencies and their related assets and transactions.
The proposed regulations are part of a new financial services and markets bill aimed at strengthening the U.K. financial service sector following Britain’s departure from the European Union.
The Bill recommends that cryptocurrencies be defined as ‘digital settlement assets (DSAs) – that can provide owners with a ‘digital representation of value or rights’.
Of further significance, the bill seeks to settle rules on how stablecoins – controversial forms of cryptocurrencies that have been pegged to the performance of traditional FIAT currecnies such as £/€/$.
Stablecoins are of particular interest within the legislation as wheels in motion were put in place last April to regulate the crypto asset with a formal announcement during the Queen’s Speech by the UK Treasury.
“Legislation to regulate stablecoins, where used as a means of payment, will be part of the Financial Services and Markets Bill which was announced in the Queen’s Speech,” said a Treasury spokesman during the Queen’s Speech.
“This will create the conditions for issuers and service providers to operate and grow in the UK, whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely.”
The UK Treasury outlines DSAs to be used as digital assets for payments that are not ‘cryptographically secured’, a process via a pseudorandom number generator that determines if a cryptocurrency is secured.
Plans for the extension of cryptocurrency regulation within the UK Market bill were accelerated over the past several months, this despite one of its biggest proponents, ex-Chancellor Rishi Sunak’s resignation from Boris Johnson government two weeks ago.
Sunak, now running for Conservative leadership to become the country’s next Prime Minister, backed plans for stablecoin regulation to “ensure the UK financial services industry is always at the forefront of technology and innovation”.
The new DSA regulations will act under Schedule 6 under the legislation, alongside proposed plans to amend the UK Banking Act 2009. The DSA service providers portion of the bill will “set rules, standards, or conditions of access or participation in relation to the payment system”.
Although retaining powers to modify regulations if deemed appropriate, the UK treasury must first, however, seek consultation from the Financial Conduct Authority (FCA), the Bank of England and other payment regulatory bodies before regulations can be put in place.
The bill is expected to be run through its first round of debates in Parliament today after its presentation on Wednesday.