The United Kingdom government has published the final recommendations for cryptocurrencies and stablecoins. The government plans to gradually implement cryptocurrency regulation by starting with fiat-backed stablecoins and then including other areas related to cryptocurrencies, including algorithmic stablecoins.
Specific Activities Related to Fiat-Backed Stablecoins Fall Under FCA Authority
According to the documents published by the UK government, legislation regarding fiat-backed stablecoins is planned to come into effect in early 2024. Specific activities related to fiat-backed stablecoins will fall under the authority of the Financial Conduct Authority (FCA).
The government’s financial branch, the Treasury, published a crypto consultation in February, which closed in April. Economy Minister Andrew Griffith stated last year that the country wants to be a cryptocurrency hub, even after the collapse of the FTX exchange, which shook and crashed the cryptocurrency market. In June, the UK Parliament passed the Financial Services and Markets Act 2023, treating the cryptocurrency market as a regulated space.
The government has also released its plans for stablecoins that could have an impact on financial stability. The Bank of England initiated a consultation on a regime for algorithmic stablecoins in May.
Positive Effects of Government Cryptocurrency Regulations
Government cryptocurrency regulations have many positive effects on the cryptocurrency market. The first is legal protection. Regulations can ensure that cryptocurrencies and cryptocurrency transactions are conducted within a legal framework, protecting the rights of users and investors. This increases market credibility. Regulations can establish requirements and controls to prevent fraud and fraudulent attempts. This makes the market safer.
Cryptocurrency regulations protect investors from malicious activities and ensure that cryptocurrency exchanges are more transparent and fair. Regulations can take various measures to maintain market stability, preventing excessive volatility and speculation. Most importantly, regulations can encourage institutional investors and companies to enter the cryptocurrency market. This contributes to market growth and maturity. Furthermore, regulations can promote cooperation and harmonization between different countries to create a more robust international cryptocurrency regulation.
Alongside the positive effects of cryptocurrency regulations, overly strict regulations or overly restrictive policies can harm the cryptocurrency market. Balanced and well-designed regulations can help cryptocurrencies benefit from technological innovations while ensuring the safety of users and investors.
