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Britain sets out plans to regulate crypto industry in wake of FTX collapse


Luna Ramsay

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The U.K. formally laid out plans to regulate the cryptocurrency industry, with the government looking to rein in some of the reckless business practices that emerged over the past year and contributed to the demise of FTX.

In a widely-anticipated industry consultation launched Tuesday, the government proposed a number of measures aimed at bringing regulation of crypto asset businesses in line with that of traditional financial firms.

Among the proposals unveiled Tuesday was a move that would strengthen rules targeting financial intermediaries and custodians that store crypto on behalf of clients.

A big theme that emerged in 2022 was the rise of risky loans made between multiple crypto firms and a lack of due diligence done on the counterparties involved in those transactions.

The U.K. proposals would crack down on such activities, seeking to establish a “robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms,” according to a statement out late Tuesday.

 

“We remain steadfast in our commitment to grow the economy and enable technological change and innovation — and this includes cryptoasset technology,” Andrew Griffith, economic secretary to the Treasury, said in a statement.

“But we must also protect consumers who are embracing this new technology — ensuring robust, transparent, and fair standards.”

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The collapse of FTX has added urgency to global regulators’ attempts to govern the regulation-averse crypto space. The European Union and the U.S. have already made proposals of their own to improve consumer protections in crypto.

In a Dec. 2 speech, Griffith said that “recent events in the crypto market reinforce the case for timely, clear and effective regulation.”

The implosion of FTX, which allegedly used customer money to make risky loans and trades, set off a chain reaction of bankruptcies for digital asset lending firms with exposure to the crypto giant, including BlockFi and Digital Currency Group’s Genesis Trading.

The proposals unveiled Tuesday would also enforce tougher transparency requirements on crypto exchanges to ensure they publish relevant disclosure documents and set out clear admission requirements for trading digital tokens.

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