While crypto adoption may lead to improvements in market efficiency, transparency, and stability, the UK government does not expect the current legislative framework for derivatives and so-called unbacked crypto assets to change at all. near future.
This is according to a consultation paper released today by the Treasury outlining its plans for the Digital Securities Sandbox (DSS), launched under powers granted as part of the UK’s Financial Services and Markets Act 2023 which came into law last year. month.
The main goal of the DDS initiative is to create a more flexible regulatory environment for digital securities, which includes both native digital securities and tokenized representation of existing securities.
However, it does not include unbacked crypto assets such as Bitcoin or Ethereum, which are collectively referred to by the Treasury as an asset type closely linked to the development of new technologies such as Distributed Ledger Technology (DLT). This type of asset also includes exchange tokens, the paper says.
“The regulatory landscape, both in the UK and as a globally coordinated response, continues to evolve,” the Treasury said. “Until there is greater certainty in these frameworks, we intend to use existing regulatory initiatives to develop policy and regulation for this asset class.”
The same approach applies to derivative transactions in underlying assets because the focus of the DSS is to regulate activities directly related to securities.
‘Transformative’ potential of cryptocurrencies
Despite excluding unbacked cryptocurrencies from the DDS, the Treasury maintains that the adoption of digital assets could still introduce radical changes in market operations.
“The use of digital assets has the potential to be truly transformative for financial markets,” the paper reads.
Initially, the proposed relaxation of legislation within the DSS is expected to last up to five years, targeting digital bonds and equities, as well as digital versions of assets such as money market instruments, with the possibility of -extend to the Treasury.
The Financial Services and Markets Act 2023 is expected to lay the groundwork for the development of the blockchain sector, paving the way for the establishment of “sandboxes,” controlled environments that facilitate the testing and adoption of innovations. technology, such as blockchain, within financial markets.
It also defines crypto assets as “cryptographically secured digital representation of value or contractual rights,” considering them as regulated financial instruments, products, or investments, while also recognizing crypto trading as a regulated financial activity.
Today’s news also comes hot on the heels of the UK’s Financial Conduct Authority (FCA) announcing that companies promoting cryptocurrencies to British customers must comply with the existing financial promotion regime by October 8, 2023.
