Regulators in the UK advise for a “cautious and responsible approach” to crypto
Regulators in the United Kingdom have voiced many concerns over the years about the region’s widespread use of cryptocurrencies.
One of the reasons they want to regulate it quickly is to prevent any negative consequences. The Bank of England Financial Policy Committee reviewed the financial soundness of crypto-assets and decentralised finance in a 40-page study.
The Financial Conduct Authority, or FCA, and the Prudential Regulation Authority, or PRA, both expressed their views.
On 24 March, the Bank of England’s Financial Policy Committee (FPC) released a report. It said that crypto assets and DeFi constituted a “limited” danger to the financial system’s stability in the United Kingdom. However, the danger increased “as these assets were increasingly integrated into the broader financial system.”
Between early 2020 and November 2021, the market capitalization of crypto-assets more than tenfolded, reaching a high of $2.9 trillion. As a result, the report stated:
“The FPC will continue to closely monitor developments in cryptoassets and decentralised financial infrastructure and will work to ensure that the UK financial system is robust to systemic threats.”
As these ramifications grew, the FPC emphasised the dangers and made appropriate recommendations. Where crypto technology was used in the same way as conventional banking, the current regulatory structure would lessen dangers. Nonetheless, encouraged financial institutions to accept such assets with a “extra cautious and circumspect attitude.” That is, until an appropriate regulation is implemented.
Additionally, the FPC applauded the Treasury’s recommendations for stablecoin regulation in order to guarantee “prudent handling.” It contained a plan to include the Bank. Additionally, he indicated support for global initiatives to control DeFi apps.
In that context, Sam Woods, Deputy Governor and CEO of the PRA, addressed a “Dear CEO” letter to banks, insurance companies, and authorised investment firms that have exposure to crypto-assets. The aforementioned letter clarified current rules and regulatory frameworks. Additionally, the letter urged companies to submit their existing cryptocurrency exposure and goals for the year by 3 June.
Following this line, the Financial Conduct Authority (FCA) of the United Kingdom issued a similar warning in another Twitter tweet.
The FCA published a new circular on Thursday for regulated enterprises in the UK that are exposed to crypto-assets.
“We are reminding all regulated enterprises of their current duties when dealing with or being exposed to crypto-assets and associated services,” according to the announcement.
By 31 March, firms must register with the FCA. If cryptocurrency firms do not register with the financial watchdog by the deadline, they risk being forced to shut their doors. Additionally, it reminded regulated enterprises of their “current responsibilities when engaging with or being exposed to crypto-assets and associated services.”