The UK has released new rules for crypto assets, ushering in a systematic upgrade of the regulatory framework

According to the UK Treasury's official website, on April 29th, the UK government released a draft of new crypto asset regulations, formally incorporating activities such as operating crypto trading platforms, issuing stablecoins, custody, staking, market-making, and matching transactions into the regulatory framework of the Financial Services and Markets Act 2000, requiring compliance with transparency, consumer protection, and operational stability standards.

Author: FinTax

Cover: Photo by simon frederick on Unsplash

News Summary:

According to the UK Treasury's official website, on April 29th, the UK government released a draft of new crypto asset regulations, formally incorporating activities such as operating crypto trading platforms, issuing stablecoins, custody, staking, market-making, and matching transactions into the regulatory framework of the Financial Services and Markets Act 2000, requiring compliance with transparency, consumer protection, and operational stability standards. UK Chancellor Rachel Reeves stated: "Through our adjustment plan, we are making the UK the most innovative place in the world and the safest place for consumers." The publication of this draft means that UK authorities hope to balance financial technology innovation with consumer protection, promoting a systematic transformation of crypto asset regulation from scattered rules to a systematic framework.

In fact, the United Kingdom is not the only one closely monitoring the development of stablecoins. Recently, with major progress in stablecoin regulation in countries and regions such as the United States and Hong Kong, and Circle's successful listing in the US, stablecoins have once again become a hot topic. On May 19th local time, the US Senate completed the procedural legislative stage of the "Guiding and Establishing US Stablecoin National Innovation Act" (GENIUS Act), clearing key obstacles for this bill specifically targeting stablecoin regulatory frameworks. The GENIUS Act first legally defined payment stablecoins as "digital assets primarily focused on payment settlement, anchored to a fixed currency value". In terms of reserve management, the bill established strict 1:1 liquidity asset reserve requirements, limiting the reserve scope to US dollar cash, short-term US Treasury bonds, and government money market funds, explicitly prohibiting algorithmic mechanisms or highly volatile crypto assets as support. This system will be deeply integrated into the US payment system and compliant financial institution network, promoting stablecoins' evolution from marginal financial instruments to mainstream monetary forms, and laying the institutional foundation for digital and traditional finance's compliant interface. On May 21st, the Hong Kong Legislative Council formally passed the "Stablecoin Ordinance Draft". The draft stipulates that unless exempted, anyone must obtain a license from the Financial Management Commissioner to conduct "regulated stablecoin activities". "Regulated stablecoin activities" include issuing "specified stablecoins" in Hong Kong and issuing stablecoins pegged to the Hong Kong dollar outside Hong Kong. The draft requires issuers to hold sufficient reserves, use compliant blockchains, and obtain licenses, improving the regulatory framework for virtual asset activities in Hong Kong to maintain financial stability while promoting financial innovation. Hong Kong has thus become the first global jurisdiction to establish a comprehensive regulatory framework for fiat-pegged stablecoins, with compliant Hong Kong stablecoins expected to be officially launched by the end of this year.

The stablecoin regulatory frameworks of the United Kingdom, United States, and Hong Kong show significant differences, reflecting their distinct strategic positioning and regulatory logic. The UK's new draft regulations, with a concept of risk prevention and innovation-friendly approach, allow stablecoins to be anchored to single or multiple legal currencies, with reserve assets potentially including a combination of fiat and other assets, while requiring issuers to establish entities in the UK and obtain FCA authorization, but without setting hard capital thresholds, aiming to balance innovation and safety. The US GENIUS Act, with a sovereign priority and US dollar binding orientation, limits stablecoins to only anchoring the US dollar, with reserve assets restricted to US dollar cash, US Treasury bonds within 1 year, or government money funds, and issuers must be regulated financial institutions (such as banks), with the strategic goal of consolidating the US dollar's hegemony in digital payments while alleviating fiscal pressure through reserve binding to US bonds. The Hong Kong Stablecoin Ordinance features compliance-based foundation and cross-border springboard, pioneering the "value anchoring regulation" principle, requiring offshore issuers pegged to the Hong Kong dollar to be licensed, with a 25 million Hong Kong dollar capital threshold, aiming to build a Web3 center and promote offshore RMB stablecoin pilots. The differences in regulatory frameworks essentially represent the contest of financial sovereignty and innovation competitiveness in the digital era, showcasing each region's characteristics and tendencies: the UK attracts global projects through openness and inclusiveness, the US consolidates its advantageous position through US dollar binding, and Hong Kong builds a compliant cross-border hub leveraging its geographical advantage, with the three regulatory frameworks representing different governments' diverse regulatory approaches to stablecoins.

5. Conclusion

According to an FCA survey published last November, about 12% of UK adults will hold crypto assets in 2024, growing nearly threefold from 4% in 2021, indicating rapid crypto asset proliferation in the country. However, the UK government states that due to an immature regulatory environment, its citizens often face risks from high-risk companies and investment scams. This new regulation covers a wide range of regulated subjects and behaviors in the crypto field, which can provide clear guidelines for crypto companies operating in the UK, promote financial technology innovation represented by stablecoins, and create a safe investment environment for financial consumers, reducing the risk of being scammed or suffering additional losses.

In summary, the UK Treasury's recently released crypto asset regulatory draft marks an important step in crypto asset regulation, aiming to establish a comprehensive, transparent, and resilient regulatory framework. By regulating key areas like exchanges, stablecoins, and key activities such as custody and staking, the UK is poised to play a more important role in global crypto asset regulation.

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