Source · Select Committees · Treasury Committee
Recommendation 2
2
Accepted
Paragraph: 31
Ensure FCA's cryptoasset authorisations gateway is open and effective for innovation.
Recommendation
It has been more than four years since our predecessor Committee’s Report called for greater regulation of the cryptoasset industry, and the FCA faces challenges in implementing existing and proposed crypto regulations. It is important that the Government and regulators strive to keep pace with developments, including by ensuring that the Financial Conduct Authority’s authorisations gateway is open and effective, so that potential productive innovation in financial services is not unduly constrained.
Government Response Summary
The government agrees on keeping pace with crypto developments, highlighting existing AML-CTF and financial promotion regulations. It commits that HM Treasury and the FCA will work to clarify authorisation gateway standards and the FCA is increasing capacity and adopting a timely process for complete applications.
Paragraph Reference:
31
Government Response
Accepted
HM Government
Accepted
HM Treasury agrees with the Committee’s conclusion that certain cryptoassets and the underlying technology could lead to improved efficiencies in financial markets and payments. The Government also welcomes the Committee’s support for the publication of recent proposals for a UK regulatory framework which is aimed at supporting the development of these technologies in the UK. Informed by the findings of the Committee’s last report, the Government has taken concrete action to address pressing risks in the sector and create the legislative foundations for future regulation as part of its phased approach. This includes the introduction of the UK’s cryptoasset anti-money laundering and counter-terrorist financing (AML-CTF) regime (effective since January 2020), and cryptoasset financial promotions legislation (debated in Parliament in early May 2023) which will ensure that cryptoasset promotions are clear, fair and not misleading. In addition, HM Treasury is taking forward legislation via the Financial Services and Markets Bill (FS&M Bill) to ensure that the legislative foundations are in place to regulate stablecoins and cryptoasset activities in the UK.3 In doing so, the Government has sought to take an agile and proportionate approach to avoid stifling positive innovation. With respect to the Financial Conduct Authority (FCA) gateway, the Government believes it is important for the UK to have a robust gateway to mitigate risks and maintain high standards and reputational integrity. As noted in HM Treasury’s Cryptoassets consultation, the Treasury is proposing a new authorisation regime under the Financial Services and Markets Act (FSMA) framework for persons who are carrying out certain activities involving cryptoassets. HM Treasury and the FCA will work with industry to ensure crypto firms are made fully aware of the standards required for approval at the FSMA gateway. Further communications will be provided in due course to ensure standards for approval are clearly available to crypto firms operating in the UK. Once a future financial services regime is in place, subject to the outcome of the consultation, the FCA has committed to adopting a timely and proportionate authorisation process for complete and accurate applications. It will also endeavour to avoid duplicative information requests of businesses, taking into account the supervisory history of businesses during the authorisation process. In preparation for delivering an effective and efficient authorisation process the FCA has and continues to significantly increase its capacity in the Digital Assets Authorisation teams alongside continued FCA-wide recruitment of blockchain expertise.