- Government reveals draft legislation for better regulating cryptoassets
- Reeves says new rules will better protect investors while boosting innovation
The Government has potentially opened the door to the arrival of new investment vehicles for cryptocurrencies after the Chancellor outlined a regulatory shake-up on Tuesday.
Rachel Reeves told attendees at UK Fintech Week summit in London the Government has designed draft legislation for better regulating cryptoassets as part of efforts to protect investors while encouraging innovation and investment.
Officials have been working behind the scenes to create a UK financial services regulatory regime for cryptoassets since 2023.
New rules are set to cover firms offering cryptoasset trading and stablecoin issuance, as well as the market abuse and admissions and disclosures regimes.
The Chancellor says firms offering services for cryptoassets like bitcoin and ethereum will soon be subject to ‘new, clear rules’ designed to ‘boost investor confidence, support the growth of fintech and protect people across the UK’.
Financial Conduct Authority research suggests around 12 per cent of UK adults now own or have owned crypto, up from just 4 per cent in 2021.
The approval of bitcoin spot ETFs in the US last year helped light a fire under crypto prices
Under the new rules, crypto exchanges, dealers and agents will be brought into the regulatory perimeter, helping to ‘crack down on bad actors’, according to the Government.
Crypto firms with UK customers will also have to meet new standards on transparency, consumer protection and operational resilience.
It follows talks with the US, where crypto regulation is more developed, with the Government citing potential for ‘greater collaboration on digital securities’ between the two countries.
Reeves added: ‘Through our Plan for Change, we are making Britain the best place in the world to innovate — and the safest place for consumers. Robust rules around crypto will boost investor confidence, support the growth of fintech and protect people across the UK.
‘Today’s announcement sends a clear signal: Britain is open for business — but closed to fraud, abuse, and instability.’
The Government will bring forward final cryptoasset legislation ‘at the earliest opportunity’, the Government said, following engagement on the draft provisions with industry.
What are crypto spot ETFs?
Last April, the US securities regulator gave the green light for the launch of exchange-traded funds tracking the price of bitcoin, marking a watershed moment for crypto assets.
The move lit a fire up crypto prices, which hit all time highs in the wake of US President Donald Trump’s inauguration before falling back amid recent volatility.
A spot ETF allows investors to track the price of bitcoin without buying the cryptocurrency.
The only way for UK investors to currently buy bitcoin is from an exchange, which can be an intimidating process and includes confusing technical aspects like wallets and keys.
It also raises security concerns regarding custody of the assets.
This has prompted big financial institutions to look at launching their own ETF, which is a type of fund that generally tracks an index or bundle of securities.
A bitcoin ETF, for example, would track the price of bitcoin and be available through brokers to buy and sell, giving investors the opportunity to gain exposure to cryptocurrencies without buying crypto itself.
Weekly global bitcoin inflows recorded their highest print since November last week, according to LMAX Group, while ethereum weekly ETF inflows saw net inflows for the first time since February.
This is Money has asked the Treasury whether the draft legislation potentially opens the door for crypto ETFs in Britain.
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Read More: Is Britain set for crypto ETFs? Chancellor reveals regulatory shake-up