The Current Landscape
Last month, the Financial Conduct Authority (FCA) implemented its long-awaited cryptoassets financial promotions regime. The aim is to ensure firms operating in the UK promote their services in a fair, clear, and non-misleading manner. This has resulted in immediate impact, with the FCA issuing 146 alerts in the first 24 hours. Big names like PayPal have paused their UK operations, highlighting the need for firms to comply with the new rules.
While some believe the FCA is being too aggressive, there is a need to strike a balance between safeguarding consumers and fostering innovation. The question now is how the UK can move forward with its ‘crypto hub’ project.
Finding the Right Balance
To achieve the desired balance, the UK must consider three key areas:
- Timing and Operational Requirements
- Phased Regulations
- Consumer and Commercial Incentives
1. Timing and Operational Requirements
The FCA has extended the deadline for certain operational requirements, acknowledging the need for a balanced approach. Learning from past experiences, it is important to work closely with the FCA to introduce further regulation that maximizes positive outcomes while considering operational considerations.
2. Phased Regulations
While the UK has shown the ability to react to global trends, there is a need to decide how proactive to be. A careful consideration of a phased approach to regulation is required to avoid confusion and accommodate emerging topics like DeFi and NFTs.
3. Consumer and Commercial Incentives
Regulatory protection is essential, but it should be balanced with incentives for both consumers and businesses. Clear workable delineations, operational clarity, and measures that foster innovation can go hand in hand with risk management. Legal clarity and assurances for customer funds also need to be addressed.
A Considered Approach
The UK’s regulatory approach to cryptoassets must be comprehensive and well-thought-out. Piecemeal actions can create more issues than they solve. Regulators and policymakers should consider both the stick (regulatory enforcement) and the carrot (incentives and operational clarity) to build a thriving digital assets sector in the UK.
