Lack of regulation in the cryptocurrency space was once thought of as an advantage to some people. However, after recent industry scandals, there have been calls from financial advisers, lawyers, and other experts to remedy that and put protections for consumers in place.
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Last week, the Treasury announced new rules around the issuance, lending, and trading of crypto tokens. If these new plans are implemented, if faced with insolvency, crypto exchanges would then be forced to ring-fence (a protective move to segregate some assets from the whole) retail funds and perform due diligence and monitoring of all assets listed on their platform. Proponents of these rules are also seeking ways to determine the eligibility of individuals who run cryptocurrency organisations.
These rules are an expansion of previous government measures that sought to regulate advertisements for cryptocurrency so it could align the sector with other areas of the financial industry. While financial experts laud the decision for regulation, they warn that we’re a few years off from achieving those goals.
If these go into effect, it will be more difficult to operate a crypto business as there will need to be more transparency over transactions with investors and additional safeguarding measures will be put into place. One of these measures will be that companies will need to become a registered entity with the Financial Conduct Authority. At the moment, a small number of businesses have already registered for anti-money laundering purposes, so they will be allowed to promote their services in the interim. The FCA has also been tasked with coming up with protections that will be made available under the Financial Services Compensation Scheme.
The industry body, Crypto UK, has supported this exemption because without it many companies would be prohibited from promoting their products while the multi-phased plan is rolled out. The first area these regulations will be tackling is stablecoin, or tokens that have value against a flat currency, moving on to broader activities like trading once the first phase is complete.
If you were too sceptical to get in on the ground floor of crypto, these new regulations might be just what you’ve been waiting for. To learn more about this or other forms of investments and how to incorporate them into your investment portfolio, get in contact with the experts at Dental & Medical Financial Services today.