Bank of England has led the lead in regulating the burgeoning asset cryptocurrency ecosystem. The framework ushers in a new age of equivalency, with cryptocurrency businesses that provide financial services subject to the same regulations as banks.
The Bank of England has began developing measures for the country’s cryptocurrency regulation. The move looks to be a surprise, given the Bank of England has previously described cryptocurrencies as a minor business with little meaningful impact on the financial sector.
In recent weeks, cryptocurrencies have been under increased scrutiny, particularly in light of Russia’s invasion of Ukraine. Cryptocurrencies have been used to generate funds for Ukraine’s war effort, while there is widespread concern that Russia may use cryptocurrencies to circumvent sanctions.
The Bank of England’s Financial Policy Committee indicated that the potential of Russia shifting to cryptocurrency was remote, but such sentiments highlight the necessity of ensuring innovation in crypto assets is underpinned by an efficient public policy framework.
“At the present, cryptocurrencies are uncontrolled, and the establishment of a complete cryptocurrency legislation would put them within the jurisdiction of authorities.”
The Financial Policy Committee also stated that the Bank of England will pursue an equivalency policy, which implies that crypto businesses that provide financial services will be subject to the same laws that govern banks. Meanwhile, the central bank will focus on mitigating the negative consequences that cryptocurrencies may have on the sector.
Deputy Governor Sam Woods of the BoE has issued a letter to the CEOs of banks and other investment firms, warning them of the possible hazards of exposure to cryptocurrencies while suggesting solutions to the difficulties. He urged companies to consult with their partners about the planned prudential approach of crypto-asset risks.
The Bank of England is particularly interested in stablecoins, and the FPC plans to introduce complete cryptocurrency regulation in 2023. Other UK agencies have made moves to restrict crypto, with the Advertising Regulations Agency issuing a red notice to businesses involved in crypto advertisements to ensure compliance with current standards. The advertising watchdog has called out advertisements by companies such as Coinbase and eToro for failing to communicate to customers the hazards of investing in cryptocurrency.
The Financial Conduct Authority of the United Kingdom has issued an order requiring all cryptocurrency companies to register with the regulator by March 31. Currently, just 33 businesses have satisfied the standard, with more than 80% of applicants being denied.