It appears that lawmakers in the UK are increasing their efforts to deal with hot-button crypto issues, but what impact if any, would be had by the recent resignation of two lawmakers in the area?
There is a growing need for the UK to bridge the regulatory gap that has arisen in the crypto market in the last few years. Legislators have only been strengthened by the recent crash, which has only strengthened their resolve. Accordingly, the Bank of England Financial Policy Committee of the Monetary Policy Committee placed a strong emphasis on the need for improved regulatory and law enforcement frameworks in the financial services sector.
More Strict Regulation Coming?
The committee stated in their latest report that although the growth of crypto-assets and the markets and services surrounding them today do not pose an immediate threat to the UK financial system, such an asset class may pose a threat in the future if it continues to grow.
In the past few months, a number of events have taken place in the crypto market that has amplified price falls. These recent events include a liquidity crisis and the dismantling of leveraged positions. As crypto becomes more and more integrated with the broader financial system, the FPC warned that if these issues remain unattended, it could lead to a worsening of systemic risks as it becomes more and more entangled with the banking system.
In the crypto market, stablecoins have become one of the hot-button issues, where regulators are keen to establish important provisions that will help to regulate the market in the long run.
It is suggested by a statement issued by the Federal Payments Commission (FPC) that these tokens, which will serve as money-like instruments within the systemic payment chain, have to meet the same requirements as conventional commercial bank money in terms of the stability of value, the quality of the legal claim, and the possibility of redeeming at par for banknotes.
The top regulator in the UK, the Financial Conduct Authority, has confirmed it will investigate Terra’s collapse and develop new regulations for the asset class as a result of this investigation.
Although it may have appeared that regulations were to take a back seat with the Russian invasion of Ukraine at the start of this year, the subsequent market crash, along with the ripple effects it caused, has forced the global watchdogs to expedite their efforts in order to prevent further losses.
The operation side, on the other hand, is in a stalemate. Crypto companies are currently facing a lengthy and complex process of obtaining licenses in order to operate. In response to this, a number of popular platforms have set up shop elsewhere in the past few years.