- July 13, 2023
- Posted by: [email protected]
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The United Kingdom’s Treasury Department has put forth a proposal to exclude unbacked crypto assets and derivatives from its plans for a digital securities sandbox. The proposal aims to provide the government with time to modify existing legislation, if necessary, for crypto products through regulatory sandboxes established under the Financial Services and Markets Act.
The purpose of these sandboxes is to grant firms the opportunity to operate while Parliament deliberates on the appropriate regulatory framework for their products or services. However, the Treasury’s consultation paper states that “unbacked” crypto assets, for which regulations are still evolving, as well as derivatives, may not fall under the considerations of the sandboxes. The Treasury is open to feedback on its proposed digital securities sandbox until the conclusion of the consultation in August 2023.
The framework suggests that assets like Bitcoin (BTC) and Ether (ETH) may not qualify for inclusion in the Treasury initiative. U.K. lawmakers have previously referred to these cryptocurrencies as “unbacked” and advocated for them to be treated as gambling.
The Treasury acknowledges the need for more certainty in regulatory frameworks and intends to utilize existing regulatory initiatives to develop policy and regulation for this asset class until further clarity is achieved. This specifically refers to unbacked tokens.
Under the Financial Services and Markets Act, crypto companies operating in the U.K. will be required to comply with specific guidelines aimed at fostering innovation while protecting consumers. Starting in October 2023, the Financial Conduct Authority has warned firms that only “four routes to lawfully communicate cryptoasset promotions” will be permitted under the framework.
The exclusion of derivatives and unbacked tokens from the regulatory sandbox demonstrates the cautious approach of the UK Treasury to navigating the evolving landscape of crypto assets. Further refinements to the regulatory framework are expected as feedback from stakeholders is considered, shaping the future landscape of digital securities in the UK.
