The UK Treasury has unveiled its proposal to exclude unbacked crypto assets and derivatives from the country's planned digital securities sandbox. The sandbox, to be established under the Financial Services and Markets Act, aims to create a regulated environment for testing and refining crypto products while allowing the government to make necessary modifications to existing legislation.
In a recently released consultation paper, HM Treasury explained that the regulatory sandboxes would give the UK government the time needed to assess whether crypto products and services should fall under existing regulations.
However, the paper also indicated that certain assets, including "unbacked" crypto assets and derivatives, may not be considered due to the evolving nature of their regulatory frameworks. The Treasury has invited feedback on its proposed digital securities sandbox until the consultation period concludes in August 2023.
The proposed framework mentions assets such as Bitcoin and Ether, suggesting that they may not qualify for inclusion in the Treasury's initiative. UK lawmakers have previously categorised these cryptos as "unbacked" and advocated treating them as gambling activities. The Treasury intended to utilise existing regulatory initiatives to develop policies and regulations for this asset class until more certainty is established within the evolving frameworks.
Under the Financial Services and Markets Act, crypto companies operating in the UK must comply with guidelines to promote innovative technologies while safeguarding consumer interests. The Financial Conduct Authority (FCA) has warned firms that starting ]October 2023, only four routes will lawfully allow them to communicate crypto asset promotions.
The exclusion of derivatives and unbacked tokens from the regulatory sandbox reflects the Treasury's cautious approach towards these crypto assets, highlighting the need for greater clarity and regulatory certainty. By excluding them from the sandbox, the government aims to address the evolving nature of the regulations governing these assets and ensure appropriate policy development in this area.
The outcome of the consultation and subsequent regulatory decisions will play a crucial role in shaping the UK's approach to crypto asset regulation and its position within the global digital economy.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash