Uk laws on bitcoin

We want to see the businesses of tomorrow — and the jobs they create - here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term. This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation. Stablecoins are a form of cryptoasset that are typically pegged to a fiat currency such as the dollar and are intended to maintain a stable value.

With appropriate regulation, they could provide a more efficient means of payment and widen consumer choice. The government intends to legislate to bring stablecoins — where used as a means of payment — within the payments regulatory perimeter, creating conditions for stablecoins issuers and service providers to operate and invest in the UK.

By recognising the potential of this technology and regulating it now, the government can ensure financial stability and high regulatory standards so that these new technologies can ultimately be used both reliably and safely. He also announced that the UK will proactively explore the potentially transformative benefits of Distributed Ledger Technology DLT in UK financial markets, which enables data to be synchronized and shared in a decentralised way to potentially achieve greater efficiency, transparency and resilience.

The government further confirmed that it will initiate a research programme to explore the feasibility and potential benefits of using DLT for sovereign debt instruments. John Glen also confirmed that the government will consult on wider regulation of the cryptoasset sector later this year. Other measures include: The UK government will explore ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market in the UK.

In summary, the FCA Guidance taxonomy splits cryptoassets into regulated and unregulated cryptoassets. Therefore, in order to determine whether a given cryptocurrency is subject to financial regulation in the UK, it is necessary to analyse whether it matches the definition of a specified investment in the RAO. This means that the transferring, buying and selling of these tokens, including the commercial operation of cryptoasset exchanges for exchange tokens, are activities not currently regulated by the FCA.

For example, if you are an exchange, and all you do is facilitate transactions of Bitcoins, Ether, Litecoin or other exchange tokens between participants, you are not carrying on a regulated activity. Cryptocurrencies with substantially similar features i. The same is also true for utility tokens. The fact that these kinds of cryptoassets may be used for speculative investment purposes in addition to being used as a means of exchange or to redeem a service should not impact this conclusion.

Stablecoins are an increasingly popular type of cryptoasset that are typically more difficult to characterise for financial regulatory purposes than classic cryptocurrencies. Broadly, a stablecoin is a cryptoasset that by design seeks to maintain a stable market value, typically through pegging the value of the stablecoin to underlying assets or currencies such as gold or USD. Often, stablecoins are primarily intended to be utilised as a means of exchange much like classic cryptocurrencies. Pegging the value of a stablecoin to an underlying asset or currency can be achieved in a variety of ways, and the precise structure adopted by a given stablecoin will determine whether it is classified as a specified investment in the UK.

For now, however, the potential changes are focused on seeking to ensure that cryptoassets that could be reliably used for retail or wholesale transactions are subject to minimum requirements and protections as part of a UK authorisation regime.

In-scope cryptoassets for the purposes of the new authorisation requirement would only include those stablecoins that rely on a link to underlying currencies or assets in order to stabilise their value. Exchange tokens, utility tokens and algorithmic stablecoins are therefore likely to remain outside the authorisation perimeter for the time being but may nevertheless be subject to other aspects of UK financial regulation such as AML regulation or, if extended, financial promotions requirements — see Money transmission laws and anti-money laundering requirements and Sales regulation below.

Interestingly, the consultation suggests that the definition of in-scope cryptoassets for these purposes may not specify that DLT and cryptography are necessary features, which would be a significant departure from the definition of cryptoasset set out in the Taskforce Report and in UK AML regulation see Money transmission laws and anti-money laundering requirements below.

This may also give rise to potential overlap with the existing UK regulatory framework governing payments and electronic money under the PSRs and EMRs and although this possibility is partially acknowledged in the consultation, it does not include any firm proposals on how this will be addressed. The activities relating to in-scope cryptoassets that the consultation envisages being subject to the new authorisation regime are: issuing, creating or destroying in-scope tokens; value stabilisation and reserve management including providing custody services in relation to reserve assets ; validation of transactions which could include, for example, the activities of nodes or miners ; providing services or support to facilitate access by participants to the network or underlying infrastructure; transmission of in-scope tokens; providing custody and administration of in-scope tokens for third parties; executing transactions in in-scope tokens; and exchanging in-scope tokens for fiat currency.

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