The Financial Services and Markets Act 2023 aims to make wide-ranging changes to the UK financial sector, giving regulators the power to supervise cryptoassets and stablecoins.
In the three tumultuous years since Brexit, the UK has officially started to repeal the “old EU laws set in Brussels” and implement its own sovereign legislation. One of these laws is the new Financial Services and Markets Bill (FSMB) – a bill that recognises crypto as a regulated financial activity.
Unlike the EU’s MiCA law, which is a legal framework dedicated exclusively to crypto assets, the FSMB is a broader finance bill that seeks to make huge changes to the UK financial sector in light of Brexit.
The bill enables the regulation of crypto assets and stablecoins in order to facilitate “safe adoption”. It also establishes “sandboxes” that can facilitate the use of new technologies, such as blockchain, in financial markets.
While the bill isn’t a fully-fledged crypto framework, it’s a significant start that signals a huge shift in government attitude. The library briefing of the bill outlines its mission to “reduce regulations in order to enable technological innovation” in the UK financial market infrastructure – a huge welcome in light of the ongoing regulatory nightmare in the US.
The bill brings the UK one step closer to its goal of become a “global crypto hub”.
In April last year, the UK government said it intended to make the UK a “global hub” for cryptoasset technology. Economic secretary to the Treasury, Andrew Griffith, commented that 2023 is proving to be “a banner year” for financial reform.
He said in a statement, “This landmark piece of legislation gives us control of our financial services rulebook, so it supports UK businesses and consumers and drives growth. By repealing old EU laws set in Brussels it will unlock billions in investment – cash that can unlock innovation and grow the economy.”
Not all crypto assets will fall under the scope of the FSMB, though.
The bill defines a “digital settlement asset” as “a digital representation of value or rights, whether or not cryptographically secured, that (a) can be used for the settlement of payment obligations; (b) can be transferred, stored or traded electronically, and (c) uses technology supporting the recording or storage of data (which may include distributed ledger technology)”.
The explanatory notes state that this definition includes stablecoins and other cryptoassets, but it is opposed to “other potentially more volatile cryptoassets”.
Stablecoins aside, the UK is also one of the 100+ countries exploring the adoptability of a central bank digital currency (CBDC). Jon Cunliffe, Bank of England Deputy Governor, said on June 15 that a final decision on whether the UK will launch a CBDC is still “some years” away, but the odds of adoption stand at around “seven out of ten“, according to a report by Bloomberg.
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