The future of cryptocurrencies in each country varies with the regulations that are in vogue from time to time. In this article, we will discuss how the current cryptocurrency regulations in the UK affect the current market as well as the future of cryptocurrencies in the country.
Aim Of Crypto Regulations
Cryptocurrencies are decentralised in letter and spirit. The sector is not meant to be governed by any centralised agencies. Then why do major crypto-user countries try to regulate the market with policy implementation? The answer is simple. Such regulations are a way for countries to have a close watch on the workings of the decentralised market.
Regulations are also a means for preventing money laundering and terrorism financing. The regulation of the interest rates of cryptocurrencies is done to counter the risk of inflation in the decentralised market.
Crypto regulations will also help government agencies keep an eye on the workings of crypto exchanges and other agencies. Such laws will ultimately protect the interests of the consumers and investors involved in the DeFi market. Moreover, such regulations will bring in checks and regulations in the realm of cryptocurrency marketing efforts.
Major Crypto Regulations In The UK
Here are some of the major crypto regulations that are in vogue in the UK now.
- Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017: This act came into force on 26 June 2017. The basic provisions of this act outline the need for registering crypto companies in the UK as per the AML requirements.
- Other significant laws passed on this subject are the EU’s AMLD5 in 2019 and the Travel Rule in 2022 Financial Services and Markets Act 2000 (FSMA), the Regulated Activities Order 2001, and the Electronic Money Regulations 2011.
Scope Of AML Requirements In The UK
The anti-money laundering (AML) requirements set by the UK government for regulations in the cryptocurrency arena are as follows.
- Appointing a Money Laundering Reporting Officer (MLRO)
- Staff Training
- Risk Assessment
- Conducting Customer Due Diligence (CDD), Simplified Due Diligence (SDD), and Enhanced Due Diligence (EDD)
- Keeping records for reference for at least five years after the conclusion of a business relationship between two or more parties.
Crypto Regulatory Changes Introduced In 2024
The UK government has introduced revised cryptocurrency rules from July 2024. Here are the major changes introduced in 2024.
- Crypto users receiving currencies worth $10,000 or above should submit the transaction details to the IRS for tax compliance measures.
- Crypto advertisements should clearly state the associated risks of trading.
- Users should advertise their investment profile.
- Users who fail to comply with the rules will be banned from further trades.
- All crypto firms should register themselves with the Financial Conduct Authority (FCA) to ensure that crypto transactions are subject to responsible oversight.
How Will These Changes Affect The Future Of Cryptocurrencies In The UK?
The changes in the cryptocurrency regulations implemented by the UK government are reasonably comprehensive in their inclusion of the various aspects of the crypto market.
Stablecoins are an important asset category that will benefit from the new regulations. The regulations ensure that the stablecoins, which are pegged to stable fiat currencies such as USD, are stable and reliable in the true sense.
The renewed regulations bring crypto staking under the ambit of regulatory agencies so that the interests of the investors are given prominence. The same applies to transactions conducted through various crypto exchanges. These regulations implemented through different phases will be tweaked with necessary changes as time passes.
The new laws are expected to bring market stability to the UK. More and more investors are expected to move to digital investments owing to the security and stability they will provide with these new regulations.
The Bottom Line
The new regulations put forward by the UK government to regulate the decentralised finance sector are aimed at safeguarding market integrity and investors’ interest.
However, it goes without saying that these regulations are a block to the ease of doing business in the crypto sector. These laws will undermine the decentralised nature of the crypto market with well-written regulations. Whether the cryptocurrency market will boom or fall with these regulations is yet to be unveiled.
