uk government

Crypto in the well and snake villain star in FCA’s pixelated animation

The United Kingdom’s financial regulator has published a pixelated, video game-styled Wild West cartoon to enlighten investors.

The United Kingdom’s financial regulator, the Financial Conduct Authority (FCA), has vigorously promoted its marketing rules for crypto firms since their publication in June. And it’s now found a way to bring them to life as a pixelated Wild West cartoon to enlighten investors.

A minute-long animation mimicking the style and sound of a video game appeared as an MP4 file on the FCA’s website on Dec. 13. The cartoon isn’t presented as part of a press release but is listed as a standalone — with no caption or explanation around it — on the publications page.

The cartoon explains how to judge whether crypto companies play by the FCA’s marketing rules. Under the rules, crypto promo campaigns are not allowed to propose free gifts or referral bonuses, and they must display a prominent warning about the risk of losing money when investing in crypto.

UK Legislators urge caution in retail digital pound rollout

The committee’s report recommends imposing lower initial limits on the value of retail digital pounds to alleviate the risk of potential bank runs amid market instability.

British legislators are urging a careful stance regarding implementing a retail digital pound.

Members of the Treasury Select Committee have expressed reservations regarding the possible launch of a retail digital pound, underscoring the need for thoughtful examination before execution.

In the interim, the committee’s report recommends imposing lower initial limits on the value of retail digital pounds to alleviate the risk of potential bank runs amid market instability.

*Screenshot of the Treasury Committee report Source: UK Parliament*

The report addressed privacy concerns, recommending that any legislation introducing a digital pound should strictly limit the use of data by the government or the BoE.

The report proposes that in the event of legislation for the introduction of a digital pound, it should expressly limit the Government and Bank of England from utilizing data acquired through the digital pound for purposes beyond those already sanctioned for law enforcement.

Committee chair Harriett Baldwin stressed the need for compelling evidence before contemplating the introduction of a retail digital pound.

Crypto assets to become a separate category in UK tax forms

The recent national budget, published by His Majesty’s Treasury, announces the amendment of the self-assessment forms for crypto assets.

As the United Kingdom gradually develops its own comprehensive crypto framework, His Majesty’s Treasury is introducing a separate category for crypto assets in tax return forms. The particular line should appear in tax forms in 2024–25.

On March 15, the U.K. Treasury published a report paper on the national budget for Spring 2023. The document announces the amendment of the self-assessment forms for crypto assets.

In the table of anticipated expenses and revenues of the national budget, the crypto assets line appears only from 2025–26. That means British citizens would have to declare them for the first time in the previous tax year — 2024–25. Currently, the Treasury doesn’t provide any specific numbers of anticipated budget revenues from this tax category — the numbers in the table stand at the nominal mark of 10 million British pounds ($12 million).

The changes were welcomed by the Chartered Institute of Taxation (CIOT), the leading professional body that analyzes national tax policies. Gary Ashford, the deputy president of the CIOT, stated:

“Highlighting the need to declare crypto asset transactions in the tax return will help raise awareness of people’s obligations in this area.”

However, Ashford highlighted the need for additional measures to counter “widespread ignorance of tax payment and reporting requirements for crypto.” According to Ashford, it is law-income crypto investors who don’t possess sufficient understanding of tax reporting.

Earlier in March, the Financial Conduct Authority (FCA) reported to the Treasury that it is “midway through a quite ambitious reset” as the Financial Services and Markets bill passes through the Parliament. When passed, the bill would give the FCA new regulatory powers over the cryptocurrency industry.

UK Bitcoin community reacts to incoming CBDC and digital pound rollout

A new role, “head of CBDC,” will help the United Kingdom to “explore the case for a digital pound,” although U.K. Bitcoiners would argue that might not be necessary.

The U.K. government’s economic and finance ministry, His Majesty’s Treasury, is recruiting for a head of central bank digital currency (CBDC) to lead the development of a digital pound. The work is described as “important, complex, and cross-cutting” and will “require extensive engagement across and beyond the HM Treasury.”

According to the LinkedIn post, the Treasury and the Bank of England are working together through the CBDC Taskforce to explore the case for a digital pound. The role of the head of CBDC may bring the United Kingdom’s government closer to its aim of rolling out a CBDC.

*HM Treasury’s job posting for a CBDC head. Source: LinkedIn*

Danny Scott, CEO of U.K.-based Bitcoin (BTC) company CoinCorner, told Cointelegraph that a CBDC could be missing the “actual real-world use and purpose, which is what we often see.”

“For those that have been in the industry for a cycle or two, we’ve seen the hypes come and go — altcoins, blockchain, distributed ledger, ICOs, DeFi, NFTs. You see large companies come along and jump on the latest hype to avoid looking like they’re falling behind. It falls under R&D and exploratory for most, which is perfectly understandable.”

Scott, who has been working and building in the Bitcoin space for over a decade, explained that sometimes, the public could misinterpret the research and development projects in the crypto space and perhaps confuse them with useful real-world solutions.

“A CBDC [digital pound] doesn’t fall far from this. Many countries around the world are exploring this and trying to understand the benefits of this over the current system — fair enough, this will happen.”

Indeed, the move toward a digital pound matches the trend among central banks worldwide to explore the potential of CBDCs. In Europe, the European Central Bank (ECB) has been actively studying the future of a digital euro, and several countries, including Sweden and Denmark, are also exploring their own digital currencies.

CBDCs claim to offer a number of benefits, including improved financial inclusion, reduced costs for businesses and consumers, and increased security and efficiency in the payment system.

However, El Salvador banked as much as 70% of its unbanked population with the introduction of Bitcoin as legal tender, while countries such as Nigeria, Ghana and Kenya can now receive money from around the world to a mobile phone or Bitcoin exchange account.

*Paying for coffee in El Salvador using Bitcoin. Source: Cointelegraph*

Moreover, there are potential risks to introducing a new digital currency. James Dewar, partner at U.K. Bitcoin merchant solution Bridge2Bitcoin and a director at Laser Eyes Cards, told Cointelegraph that the “introduction of a CBDC would itself present different challenges and risks than Bitcoin,” as the CBDC requires “trust in third parties, central banks and governments, to not abuse the supply of the currency.”

“This risk applies at the macro level as it does today, but more worryingly with a CBDC on the ability for a government or its agencies to monitor and censor individual spending. This is a huge risk for the rights of freedom and property ownership within our societies.”

He raises the question, “Whilst we may trust one government or another, do we as citizens trust all future governments, of whatever color, with this power?” Tony Yates, a former senior adviser to the Bank of England, has spoken out against CBDCs. Resonating Dewar’s thoughts, he questioned the motivations behind the global rollouts of CBDCs, calling them “suspect.”

Dewar continued, “It is reasonable that government explore the idea properly. Overall, we worry that there may be political pressure brought to the process that ignores or significantly downplays the risks to society of a CBDC.”

The “digital” aspect of money is also brought into question. The U.K. is increasingly a digital cash-based society: Less than 15% of payments are made with physical cash according to the Bank of England, and as many as 23 million people — about one-third of the U.K. population — did not use cash at all in 2021.

*Cointelegraph reporter Joe Hall races contactless payments, Bitcoin vs. pounds sterling in Gibraltar. Source: Cointelegraph*

Scott asks of the treasury, “Don’t we already have a digital pound?”

“From an end-consumer perspective, the pound is mostly digital these days regardless of the mechanism used. So, once they have finished their exploratory stages, I would love to see a list of the benefits and new features a CBDC will bring to the public.”

In the meantime, Scott will “continue to focus on Bitcoin and making a global, interoperable system everyone can participate in.”

Dewar shared that there could be hope for Bitcoin and the U.K. government: “The role description notes that the emergence of private sector money — such as Bitcoin — offers exciting opportunities for U.K. businesses and consumers, and we would very much agree with that at Bridge2Bitcoin.” The Bank of England CBDC, by design, will be available to Brits, although no official timeline is set.

British authorities split on banning sale of crypto investment products

Policymakers in the United Kingdom are divided on whether the sale, marketing and distribution of derivatives and exchange-traded notes, tied with crypto, should be banned.

The policy decision-makers in the United Kingdom are divided on whether the sale, marketing, and distribution of derivatives and exchange-traded notes (ETNs) tied with cryptocurrencies should be prohibited when it comes to retail investors. The Regulatory Policy Committee believes the measure, adopted in 2021, is unjustified under the current circumstances.

The chief British regulator, the Financial Conduct Authority (FCA), imposed the prohibition in January 2021. Since then, companies can no longer offer cryptocurrency derivatives products such as futures, options and exchange-traded notes, or ETNs, to retail customers.

The blanket ban was imposed despite 97% of respondents to the FCA’s consultation opposing the “disproportionate” prohibition, with many arguing that retail investors are capable of assessing the risks and the value of crypto derivatives.

On Jan. 23, the Regulatory Policy Committee (RPC) — an advisory public body sponsored by the government’s Department for Business, Energy and Industrial Strategy — laid out its reasons against FCA’s prohibition.

Using the cost-benefit analysis, the RPC evaluated annual losses from the measure at roughly 268.5 million British pounds ($333 million). As the RPC states, the FCA didn’t provide a clear explanation of what specifically would happen in the absence of the prohibition. It also didn’t explain the methodology and calculations to estimate the costs and benefits back at the time. On that basis, the RPC rates the prohibition at the “red” level, which means it is not fit for purpose,.

The negative review by RPC doesn’t necessarily lead to the direct reversal of legislation. However, given the committee’s ties to the Department for Business, Energy and Industrial Strategy, it may mark the different understanding of the reasonable regulation by the FCA and the government.

Last year the British financial authorities made a number of significant efforts to foster the development of the digital industry. For example, “designated crypto assets” were included in a list of investment transactions that qualify for the Investment Manager Exemption.

UK includes crypto investments under the Investment Manager Exemption

The measure should help British funds dealing with foreign investors adopt digital assets in their portfolios.

The transactions of “designated crypto assets” entered into from the tax year 2022 to 2023 onwards will be qualified for the Investment Manager Exemption in the United Kingdom. Certain legislation was announced by the U.K. government back in April and is now executed by the Commissioners for His Majesty’s Revenue and Customs (HMRC).

On Dec. 20, the HMRC published its legislation to define “designated crypto assets” and include them in the list of investment transactions that qualify for the Investment Manager Exemption.

The regulation, coming into effect on Jan. 1, 2023, doesn’t contain a positive definition of “designated crypto assets.” However, citing section 2 of the Investment Transactions(Tax) Regulations from 2014, it refers in particular to the class of “investment transactions.” Thus, the transaction for the provision of services in the period while the crypto asset is held by the non-U.K. resident won’t be counted.

The Investment Manager Exemption (IME) serves the U.K. as a tool to strengthen the country’s status as a financial hub. It provides non-U.K. resident investors with a right to appoint U.K.-based investment managers to conduct certain investment transactions on their behalf, without bringing them into the scope of U.K. taxation.

Thus, the “designated cryptoassets” will be equated to stocks and other assets under the governance of British funds, acting on behalf of non-British investors. Such a measure was introduced as a part of the government’s FinTech Sector Strategy on April 4. As the consultancy paper states:

“This will provide certainty of tax treatment to U.K. investment managers and their non-U.K. resident investors who are seeking to include cryptoassets within their portfolios, and we anticipate that this will also encourage new cryptoasset investment management businesses to base themselves in the U.K.”

As the HMRC decision reflects the long-term strategy of the previous government, there are signs of altitude changes among British regulators. Ashley Alder, who will assume control of the United Kingdom’s Financial Conduct Authority (FCA), the main financial regulator in the country, has recently told Treasury members that cryptocurrency-related businesses were “deliberately evasive” and suggested the sector facilitated money laundering.

UK crypto bill to restrict services from abroad: Report

The regulatory amendments will broaden the powers of the country’s financial regulator and put the crypto industry under tighter scrutiny.

Despite the Conservative Party’s rhetorical embracement of crypto under the new Prime Minister Rishi Sunak, the upcoming regulatory framework will reportedly tighten scrutiny over the industry. The legislation updates will broaden the powers of the financial regulator and probably limit foreign companies’ operations in the United Kingdom.

According to a Financial Times report, the FTX collapse has influenced the course of the regulatory regime in the U.K. Reportedly, the Treasury is finalizing a package of guidelines that will enable the Financial Conduct Authority (FCA) to monitor the operations and advertising of crypto companies in the country. There also would be restrictions on selling crypto on the U.K. market from abroad.

Although the report doesn’t reveal more specifics on those restrictions, assumably, they’d be enforced to force the companies to register with the FCA. The procedure is tough enough already, as 85% of the applicants did not pass the FCA’s anti-money laundering (AML) tests, according to its chief executive Nikhil Rathi.

The guidelines are being prepared as a part of the financial services and markets bill. The large bill, which includes but is not limited to crypto regulation, has already been introduced to the British Parliament. While the U.K. launched its consultation on crypto in 2021, according to the FT sources, it could slip into 2023 due to “fast-moving events” in the industry.

However, on Dec. 7 the cross-party Treasury committee will hear out the experts from the FCA and Bank of England on the risks of crypto and the “pros and cons” of central bank-issued cryptocurrency (CBDC). The hearing will also include the talk of the investigative journalist, who’ve covered the investments, made by British football fans under the influence of crypto ads.

In early November, Members of the Digital, Culture, Media and Sport Committee opened an inquiry to hear from the public on the potential benefits and risks of nonfungible tokens, or NFTs, and blockchain on the country’s economy.

Stablecoins have a new name in Great Britain: Law Decoded, Oct. 24–31

From El Salvador and Lugano’s collaboration to yet another lawsuit against Do Kwon, this is what the last week in regulation looked like.

The first full week under the leadership of the newly-elected Prime Minister Rishi Sunak saw a major landmark for crypto regulation in the United Kingdom. The Financial Services and Markets Bill, made public on Oct. 25, aims to enhance the U.K.’s position as a “global leader in financial services” — but what is more important is that it contains some new definitions for crypto products.

The bill moves stablecoins from the category of crypto assets to digital settlement assets (DSA) — a new category marked by its potential “to develop into a widespread means of payment.” It’s yet to be seen what regulations the DSA will be subject to and if this change of status will guarantee them a green light for adoption. But, even that scope of change brings optimism.

It seems we may witness unprecedently active pro-crypto regulation on the islands, given Sunak’s known ambitions on the matter. The new PM voiced has previously voiced his support for crypto and even commissioned the Royal Mint to issue a nonfungible token (NFT) by the end of the year during his time as the head of the treasury. However, the industry still faces pressure from local banks, which try to block businesses and individuals from investing in cryptocurrency.

Singapore intends to ban cryptocurrency credits

In one of two consultation papers on proposals for regulating the digital payment token service providers, issued last week by the central bank of Singapore, there is a proposition to ban digital payment tokens (DPTs) from providing retail customers with “any credit facility,” whether in the form of fiat currencies or crypto.

According to the regulator, crypto service providers should also not be allowed to accept any deposits made using credit cards in exchange for crypto services. According to the authority, “Any form of credit or leverage in the trading of DPTs” would result in the “magnification of losses,” potentially leading to bigger losses than a customer’s investment.

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An agreement on adoption between Lugano and El Salvador

The Swiss city of Lugano and the country El Salvador have signed an economic cooperation agreement based on crypto and blockchain. Speaking to Cointelegraph, former Blockstream chief strategy officer Samson Mow said the agreement was the “next step” in nation-states and cities adopting BTC:

“[El Salvador and Lugano are] going to start working together and collaborating on joint initiatives. I think that’s the way we push each other forward — basically create alliances between places that have adopted Bitcoin.”

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Yet another lawsuit for troubled Do Kwon

Do Kwon, the co-founder of Terraform Labs — who may be facing legal actions in South Korea and the United States — is the target of a lawsuit in Singapore along with the Luna Foundation Guard (LFG) and Terra founding member Nicholas Platias.

In a lawsuit filed in Singapore’s high court, 359 individuals allege Kwon, Platias, the LFG and Terra made fraudulent claims, including that Terra’s stablecoin, TerraUSD (UST) — now TerraUSD Classic (USTC) — was not “stable by design” and unable to maintain its U.S. dollar peg. The claimants are seeking compensation for roughly $57 million worth of “loss and damage” combined based on the value of UST tokens they purchased and held or sold amid the market downturn in May.

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The UK has a new name for stablecoins and a new bill to regulate crypto

The proposal is another ripple of recognition for the Bitcoin, crypto and digital assets industries in the United Kingdom.

The United Kingdom moved forward on the Financial Services and Markets Bill on Oct. 25, hardening its vision for Bitcoin (BTC) cryptocurrency and “digital settlement assets” in the country.

The suggested bill proposes “a range of measures to maintain and enhance the U.K.’s position as a global leader in financial services, ensuring the sector continues to deliver for individuals and businesses across the country.”

The bill reasserts the U.K.’s intention to become a global cryptocurrency hub, comments echoed by Lisa Cameron, member of parliament and the chairperson of The Crypto and Digital Assets All-Party Parliamentary Group. In an exclusive interview with Cointelegraph over the weekend, she explained that crypto is on the lawmakers’ radar, although there is a lot of education to be done.

The bill builds upon existing measures to broaden regulations of stablecoins and mentions “Digital Settlement Assets” (DSA) as a new term, moving away from the use of “crypto assets.” According to the U.K. government, “crypto assets use some form of distributed ledger technology (DLT),” whereas DSA includes stablecoins, “given their potential to develop into a widespread means of payment.”

The U.K. government had previously commented that there will be a “package of measures” aimed at improving regulation and clarity surrounding blockchain, crypto and Bitcoin.

Elsewhere, the new prime minister, Rishi Sunak, has also expressed interest in certain areas of cryptocurrency, such as his support for the creation of a Royal Mint nonfungible token.

*Rishi Sunak was a supporter of the first “Royal Mint NFT,” which has yet to materialize. Source: HMRC*

The youngest leader to take up office in Number 10 Downing Street has also been vocal in support of central bank digital currencies.

The recognition of crypto and digital assets as financial instruments is yet to be scribed into law. The bill must pass crucial steps: The House of Lords will be required to approve or amend the bill before final royal approval by the new monarch, King Charles III.

British MP Lisa Cameron on Bitcoin and UK becoming international crypto hub

In an exclusive interview with Cointelegraph, U.K. Member of Parliament Lisa Cameron said there is a “vision” that the U.K. will become an international hub of crypto and digital assets.

The United Kingdom could be warming to Bitcoin (BTC) and crypto. Taking a timeout from Scotland’s first major Bitcoin conference, Cointelegraph spoke to Lisa Cameron, a Member of Parliament who is spending more and more time working with digital assets. Cameron told Cointelegraph:

“I have spoken to companies who are involved in CBDCs and stablecoins. We’ve looked at crypto tokens, and Bitcoin is obviously part of the sector.”

As the Scottish National Party Member of Parliament for East Kilbride, Strathaven and Lesmahagow (areas of Scotland), Cameron works in Westminster–a metonym for the Parliament of the United Kingdom. She rubs shoulders with the new crypto-curious Prime Minister, Rishi Sunak.

Cameron is also the chairperson of The Crypto and Digital Assets All-Party Parliamentary Group (APPG). The forum discusses, “The challenges and opportunities relating to the crypto sector and explores the need for future regulation of the sector.”

While the creation of the APPG would suggest that Bitcoin and crypto might be making it mainstream, the future of money remains a fringe discussion topic in the United Kingdom. Interest in “digital assets” waxes and wanes with the crypto bear and bull runs.

A Royal Mint nonfungible token (NFT) was recently floated by the then Chancellor, now Prime Minister, Sunak, and the Bitcoin and crypto community are increasingly vocal in response to surging inflation rates. However, U.K. regulators have also cracked the whip on crypto advertisements and queried the creation of digital asset laws.

*British MP Lisa Cameron speaking with Cointelegraph’s Joe Hall*

For policymakers in such an environment, Cameron mentioned the importance of education in parliament. Cameron explained:

“We are on a learning curve and it’s just very, very important because the U.K. government has a policy vision that the U.K. will become an international hub of cryptocurrency and digital assets.”

Speaking from her home country, the Scot told Cointelegraph that the key issue is consumer protection. It’s about looking at regulatory frameworks moving ahead in the United Kingdom. In a nod to treating Bitcoin differently from other cryptocurrencies, Cameron continued:

“In my understanding and from the session we’ve had at the Bitcoin conference, you know, some of that relates to Bitcoin, some perhaps not all so greatly because of the decentralized nature of it.”

Days after the conference, Cameron took to the stand in Parliament to pitch the Chancellor of the Exchequer, Jeremy Hunt, to discuss the U.K.’s vision of becoming a global crypto hub.

Chair of the APPG @DrLisaCameronMP asks to meet with Chancellor @Jeremy_Hunt about @hmtreasury’s commitment to regulation and consumer protection and the vast potential of #crypto & #DigitalAssets in job creation, innovation and growth. #cryptocurrency pic.twitter.com/yiuC89Ytf2

— Crypto & Digital Assets APPG (@cryptoappg) October 23, 2022

Cameron mentioned her participation at the U.K. Bitcoin Conference and the Digital Assets Summit as part of her request.

Personally, Cameron conceded that she does not hold any crypto personally–and joked that she wouldn’t become a Bitcoin maximalist any time soon: “It would skew the report. It could, you know, mean that I’m less objective.”

When quizzed on whether she preferred the time spent at the crypto and NFT-friendly Digital Assets Summit or the Bitcoin conference in her home turf in Edinburgh, she mentioned, “I do have a bit of a leaning towards my home town,” although having a conference in London and a conference in Scotland’s capital is a good thing: “They complement each other.”

This interview is part of an upcoming Cointelegraph Youtube interview. Subscribe here.