The UK Treasury stated in a newly published consultation report that it does not foresee making changes to the current legal framework for derivatives and unbacked crypto assets in the foreseeable future. The Financial Services and Markets Act 2023 of the UK, which just became law, provides the authority for the establishment of the Digital Securities Sandbox (DSS), which is described in the report.
Create a flexible regulatory environment for digital securities, including both native digital securities and tokenized. This representation of current securities is the main goal of the DSS program. The Treasury believes unbacked crypto assets like Bitcoin and Ethereum are related to DLT development. They will be excluded from the sandbox. According to the report, exchange tokens also fall under this asset category.
The Treasury understands that both in the UK and internationally, the regulatory environment for digital assets is still developing. To create laws and regulations for this asset class, the government intends to leverage already-existing regulatory measures. This happens until there is greater certainty in the regulatory frameworks.
Although unbacked cryptocurrencies are not included in the DSS, the Treasury acknowledges that their adoption might have a big impact on how markets function. The usage of digital assets “has the potential to be genuinely transformative for financial markets” according to the study.
UK: Changes in Legislation
The DSS’s legislation will be eased initially for up to five years. This happens with a focus on digital bonds, shares, and forms of assets like money market instruments. If necessary, the Treasury may extend this time frame.
By providing “sandboxes”, controlled environments that make it easier to test and deploy new technologies within financial markets. The Financial Services and Markets Act 2023 lays the groundwork for the development of the blockchain industry. Additionally, it recognizes cryptocurrency trading as a regulated financial activity and classifies crypto assets as regulated financial instruments, goods, or investments.
The Treasury’s move follows the Financial Conduct Authority (FCA) of the UK’s recent announcement that businesses advertising cryptocurrency to British customers must abide by current financial promotion standards by October 8, 2023. The UK government has taken a proactive approach to regulating digital assets. It shows its dedication to fostering a stable and encouraging environment for the blockchain sector.