HM Treasury has finally published its much anticipated consultation and call for evidence on a future financial services regulatory regime for cryptoassets. Building on the forthcoming stablecoin regulatory regime, the Treasury’s consultation sets out proposals to bring a broad set of cryptoassets within the Financial Services and Markets Act 2000 (FSMA) regulatory perimeter. This will result in a fundamental change in the way that cryptoasset businesses operate in the UK: the key outcomes of the consultation are that (a) cryptoasset service providers will require full FCA authorisation to operate where they do so in the UK (or have customers in the UK), and (b) a new bespoke regime will be brought in governing public offers of cryptoassets and admission to trading of those assets on platforms.
Though the Treasury’s proposals are similar in scope to the EU’s proposed Markets in Cryptoassets Regulation (MiCA), there are important differences in the way that the regimes will operate, with MiCA expected to be much more closely aligned with the Markets in Financial Instruments Directive (MiFID) framework, while the UK’s proposed regime intended to build in a greater degree of flexibility and agility by drawing regulatory inspiration from a wider range of traditional financial services frameworks. Recognising the significant overlap, the proposals include potential equivalence measures. The Treasury’s consultation also suggests options for the future regulation of areas such as decentralised finance (DeFi) which are not covered in MiCA but expected to be included for consideration in a future “MiCA II”. To learn more about MiCA, see our previous client alert.
In a very welcome development, the Treasury has also issued a policy statement on cryptoasset financial promotions, confirming that it will introduce a temporary bespoke exemption relating to certain cryptoasset promotions, alleviating industry concerns that forthcoming changes to the financial promotions regime would amount to a total ban on cryptoasset promotions.
This alert highlights key proposals in the Treasury’s consultation, but does not cover the forthcoming stablecoin regime – for more detail on that regime, see our previous alert.
To read the full alert, click here.