As the race for global dominance in the cryptocurrency industry heats up, prominent financial lobby group TheCityUK has published an extensive report that explains what regulators can do to stay ahead of the competition.
TheCityUK’s Leadership Council count among its ranks senior leaders from various sectors of the financial industry and often organises meetings with regulators, government ministers, and other key stakeholders.
In its 20-page report titled “Cryptoassets: Shaping UK regulation for innovation and global leadership,” the group highlighted different areas of the crypto economy where regulators can take the lead in providing clear guidelines to companies.
According to the report, the current regulatory landscape provides the UK with a “valuable opportunity to shape its response to DLT and cryptoassets in a way that encourages competitiveness within the [region].”
Among other things, the report recommends that the UK “set high standards in cryptoasset and DLT regulation while recognising that not all uses of DLT need to be regulated.” In setting such rules, regulators are encouraged to consider the specific features and risks associated with certain novel applications of blockchain technology.
Given that tokens “do not always fit neatly within the parameters of existing regulatory regimes” TheCityUK recommends that the UK adopt four further classifications for crypto-tokens, in addition to the three already being used by the Financial Conduct Authority (FCA). The three proposed taxonomies include e-money tokens, stablecoins, NFTs, and CBDCs.
Another key recommendation is that regulators always maintain open communication with crypto industry participants with the goal of achieving “a proportionate and risk-based approach” that does not deter innovation.
The report also noted that legislators and regulators understand and appreciate the role that stablecoins and central bank-backed digital currencies (CBDCs) will play in the financial system over the coming years.
TheCityUK finally admonished that “the UK must act quickly to set a gold standard in cryptoassets and DLT regulation,” and also explore its leadership of the G7 and other international relationships to get the desired results.
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