LONDON, Feb 1 (Reuters) – Britain’s finance ministry said on Wednesday that turmoil in the sector and the collapse of exchange FTX indicated risks that needed to be addressed.
Cryptocurrencies such as Bitcoin have little direct control globally, but regulators are closely watching the FTX collapse last year, which cost millions of investors billions of dollars in losses, some of them in Britain.
Financial Services Minister Andrew Griffiths said on the proposals for public consultation, “Our view is that this strengthens the case, effective, timely supervision and active engagement with the industry.”
“This includes the proposal to bring centralized cryptocurrency exchanges into financial services regulation for the first time, and other core functions such as escrow and lending,” Griffiths added.
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The new rules cover entering into a crypto-related business platform, making public offers, making payment transactions or money transfers, arranging deals, operating a platform, security and mining transactions, or operating a node on the blockchain.
Currently, crypto companies only need to demonstrate that they can comply with anti-money laundering protections.
Binance, the largest crypto exchange, said on Wednesday that it “welcomed the public consultation, voicing the need for effective and appropriate regulation to help mainstream adoption of digital assets.”
Research shows that 5-10% of adults in Britain now own cryptoassets, an increase of more than 100% in the last one-two years, with the participation of institutional investors also growing, the Ministry said.
The sector has shrunk dramatically over the past year, with total global market capitalization falling below $1 trillion from a peak of nearly $3 trillion.
Britain had launched a consultation in January 2021 to regulate stablecoins, a subset of cryptoassets backed by money or other assets, but decided to include the entire crypto sector.
After a three-month consultation, there will be secondary legislation later this year, along with suggestions from the Financial Conduct Authority’s public consultation.
Reporting by Huw Jones; Editing by Jason Neely and Sharon Singleton
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