UK financial industry group recommends “innovative cryptocurrency regulation”

City UK, the main trade association for the UK financial industry, released a report on the 25th calling on policymakers to issue clearer regulations on crypto assets.

Crypto Regulation

TheCityUK is one of the most powerful lobbying groups in the UK financial industry. The report is titled "Cryptocurrency: UK innovation and regulation for global leadership." It proposes a number of policies that it hopes will put the UK at the forefront of the world in the cryptocurrency sector.

The main policy recommendations are as follows:

The UK should move quickly to establish advanced regulation around cryptocurrencies and blockchain technology (DLT). On the other hand, we also recognise that it is not necessary to regulate all uses of DLT. Do not ignore the characteristics and risks of new technologies and case studies. A balanced risk-based approach (generally identifying risks and taking appropriate action) is important, and the industry needs to continue to engage in the development of regulations. We should be aware of the transformative potential of stablecoins and central bank digital currencies (CBDCs).

"Token classification needs to be cleared"

He also pointed out that classifying token types is also important for building an ecosystem suitable for innovation. Since all digital assets such as virtual currencies have different characteristics and use cases, it is necessary to clearly define and classify tokens under the law.

TheCityUK first mentioned "exchange tokens" as a possible type of token. It is often referred to as "virtual currency" and was created with the intention of using it for payment and transactions, but in recent years it has become a target of speculation.

In addition, "utility tokens" that provide access to services and products, "security tokens" with the characteristics of conventional securities, "E-money" that represents a digital representation of legal tender, and traditionally backed "table coins", central bank digital currencies "CBDCs" and "NFTs (non-fungible tokens)" that are recently listed for digital art and in-game items.

According to the report, currently only security tokens and e-money are clearly regulated in the UK, which also states that exiting the EU could allow the UK to respond faster and more flexibly to emerging technologies.

Other suggestions

In addition, please keep the following points in mind when implementing the regulations:

Ideally, each country should recognize regulatory standards to some extent on each other to achieve cross-border interoperability. It is important to understand that cryptocurrencies and related business models are inherently cross-border. It is important to protect UK consumers, but foreign companies and cross-border/global business models should not be over-regulated. Rules need to be developed in dialogue with relevant industries. In the cryptocurrency sector in particular, some approaches can be applied to existing regulatory frameworks, but new mechanisms such as decentralized mechanisms (DeFi) do not fit into conventional frameworks, and we will explore a customized approach with the participation of the industry.

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