UK crypto regulation diverging from the EU
Recently, the United Kingdom and the European Union have introduced significant legislation to regulate cryptocurrencies. Both are working towards providing a safer environment to consumers. However, the divergence between EU and UK crypto regulations is becoming apparent.
Since Brexit, the UK has been formulating new legal frameworks for different domains. Earlier, the regulatory divergence for financial service providers gained much attention. Naturally, this divergence extended to virtual currency regularisation.
The differences between the laws include the definition of crypto assets, virtual asset service providers (VASP), focus points in the enforcement strategy, and various others.
How does UK crypto regulation differ?
One of the major differences between the EU and UK crypto regulation is the definition. Britain’s Financial Conduct Authority (FCA) focuses more on “digital settlement assets”. It mainly includes stablecoins as a payment method. However, it does not declare them as a form of investment. On the other hand, the MiCA act of the EU has a broader definition which allows a variety of new tokens to be included.
Similarly, there are differences in the definition of service providers too. The MiCA framework also proposes a broader interpretation of VASPs. It expands from fiat to crypto to crypto exchanges. Moreover, it covers advisory, trading, and custody services too. In comparison, FCA legal framework covers only custody and exchanges as VASP.
Last month, the US and UK crypto regulation authorities began collaborating to foster the cryptocurrency and NFT market, acknowledging the importance of regulatory partnerships for a safe market.
Differences in enforcement strategy
Currently, FCA’s primary focus is on stablecoins to mitigate consumer risk. It is also working with the regulatory bodies of the United States to regularise the market and foster financial innovation. Moreover, like the US’s SEC, it might act against scams and declare some coins and tokens as securities. On the other hand, MiCA focuses on a broad approach that includes the AML laws and establishing a risk-free environment for regional investors.
Author: Wasay Ali
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