By Huw Jones
LONDON (Reuters) – Britain said on Monday it would legislate to implement its first set of rules to regulate the crypto sector, requiring market participants to be authorised before they can offer services to consumers.
Cryptoassets remain a tiny part of the world’s financial system, although bitcoin has revived in price after the collapse of FTX crypto exchange raised concerns about links to mainstream finance and harms to consumers.
The European Union has already approved the world’s first set of comprehensive rules for cryptoasset markets, which are already attracting crypto firms to set up base in the bloc.
Britain’s finance ministry said it would move ahead as proposed in a February public consultation, requiring firms undertaking cryptoasset activities to be authorised by the Financial Conduct Authority.
The rules focus on cryptoassets, such as bitcoin, and the underlying distributed ledger technology (DLT) or blockchain that underpins the sector.
“The government’s proposed measures have been informed by recent market events – including the failure of FTX – which reinforce the case for effective regulation and sector engagement,” the ministry said.
Britain remains committed to creating a regulatory environment in which firms can innovate, while maintaining financial stability so that people can use new technologies both reliably and safely, it said.
It said it would accelerate overall implementation of the rules in order to give the sector clarity, with secondary legislation presented to parliament next year.
Crypto firms currently face only requirements to have safeguards against money laundering.
The UK announcement comes at a time of reviving fortunes for the crypto sector after bitcoin, the largest cryptocurrency by circulation, lost much of its value amid the FTX and other scandals over the past year.
Last week bitcoin rose to $38,872, its highest in nearly a year and a half, on mounting speculation that an exchange traded bitcoin fund is imminent in the United States.