The UK government provided a detailed response to its consultation for crypto asset regulation, publishing on Monday final proposals that were informed by companies, experts and market events, "including the failure of FTX."
The proposals outline the UK government's intention to bring a number of crypto asset activities into the regulatory perimeter for financial services for the first time. "The government's position is that firms dealing directly with UK retail consumers should be required to be authorized irrespective of where they are located," the report said.
The document described how firms undertaking crypto asset activities will now have to be authorized by the UK's Financial Conduct Authority. The authorization will include a stipulation for crypto exchanges to create detailed requirements for admission standards and mandate disclosures when listing new assets.
No regulatory framework for DeFi
The final proposals did not cover the regulation of decentralized finance, and the report said that DeFi regulation would not be attempted in this phase of development.
"In line with consultation responses, HM Treasury recognizes that it would be premature and ineffective for the UK to regulate DeFi activities currently. Instead, the government will support efforts at the international level through work at both the FSB and standard-setting bodies to inform a future domestic framework," the report stated.
The rules laid out in the final proposals document will be brought under existing UK market law, rather than exist as a standalone regulatory regime. "The consultation has proposed to apply and adapt existing frameworks for traditional finance custodians," the document added.
According to the UK Treasury, the final proposals seek to deliver on the UK's ambition to become a financial services sector at the forefront of crypto asset technology and innovation.
"The proposals plan to create the conditions for crypto asset service providers to operate and grow in the UK, whilst managing potential consumer and stability risks," the UK Treasury statement said.
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