The UK treasury has launched its anticipated regulations to supervise crypto firms and prevent the virtual asset sector from money laundering and terrorist financing crimes.
The UK regulatory authorities published a legal framework to regulate the crypto industry and stablecoins. The latest regulations show the determination of UK law enforcement agencies to create a “safe, transparent, and innovative” crypto sector that protects customer investment and global financial stability. The regulations aim to create a balance between protecting investors from fraud and allowing innovation in the sector. The UK crypto laws also seek to ensure global financial stability by establishing clear standards for crypto asset service providers. Implementing these strict obligations will enhance the security of virtual assets and assist financial institutes in business verification during onboarding.
According to the new regulations, “stable tokens” will be introduced, which are crypto coins, to stabilize their value with the crypto basket. These tokens could include stablecoins and fiat currencies as well as contracts to adjust their demand and supply. In the published papers, they claimed that cryptocurrencies pose significant threats to the country’s financial system, mainly when it is used as a store value. The new regulations claimed that stablecoins and other cryptocurrencies that contain any values and are used in trading should be regulated according to traditional payment services. They also mentioned the KYB compliance system and controls in the crypto trading firms. The crypto laws will mitigate risk for consumers and investors, including compliance with anti-money laundering and counter-terrorism financing. The UK regulatory organization will issue stablecoins, the Financial Conduct Authority (FCA), and guide investors clearly and accurately about the nature and risk of their tokens.
The paper also emphasizes the government’s intentions to develop a rigid system and uphold international standards to protect the crypto industry from financial crimes. They also added the supervision of emerging trends in the visual assets sector to conduct risk assessment. The UK’s government also proposed that other digital businesses and platforms such as crypto exchange, trading, and intermediaries must comply with international AML standards. Moreover, these entities also have to uphold the FCA rules according to their services.
These UK perimeters are only enforced on fait-backed stablecoins, while it did not cover the other coins backed by commodities, cryptoassets, or algorithms. However, the UK government claimed that they will keep these stablecoins under review and notice their activities to combat money laundering. Additionally, they may extend the obligations in the future for these coins. The authority stated the legislation of these rules will be implemented as soon as the parliament approves it. In the papers, the UK’s government threatened the crypto firms that they could face hefty fines and jurisdictions for non-compliance with these virtual asset regulations.
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