The UK Treasury is paving the way for blockchain’s future and seems to be treading lightly. The latest news indicates that this governing body is planning to exclude ‘unbacked’ tokens and derivatives from its impending regulatory sandbox. As part of its broader strategy to foster innovation, it’s clear that UK Treasury aims to give crypto firms a much-needed testbed to figure out their compliance with existing regulations under the Financial Services and Markets Act. However, certain types of crypto assets seem unlikely to enjoy this privilege.
It’s a tentative move, seeking balance between advancing innovations and ensuring adequate safety measures for consumers. Setting unbacked crypto assets aside from the sandbox may signal caution towards these volatile and uncertain assets. According to the Treasury, rules for regulating such unbacked cryptoassets are ‘still evolving’. Existing measures are asserted to be enough for assets like Bitcoin and Ethereum, often described as ‘unbacked’, whose status under the proposed framework remains uncertain.
Cryptocurrencies have also been compared to gambling by lawmakers – implying risks that might not be suitable for conventional investment or business models. This relegates these tokens to a gray area, with the Treasury suggesting that regulatory development will fall under existing contributions until there’s enough clarity.
Under the same Act, crypto companies operating within the UK will need to adhere to guidelines designed for promoting innovative technologies while also ensuring consumer protection. The Financial Conduct Authority (FCA) emphasises that only “four routes to lawfully communicate crypto asset promotions” will be permitted from October 2023.
Thus, while the UK Treasury’s proposed sandbox presents an opportunity for firms to experiment and learn, it appears to come with considerable constraints. The regulatory environment remains ambiguous, particularly for unbacked cryptocurrencies, where the line between innovation and uncontrolled risk might blur, and companies may find themselves trapped in a complex muddle of timely compliance and progressive objectives.
The discourse veers towards echoing the old saying – that with greater risk comes greater reward. But perhaps in a cautiously modified tone – with greater risk should come greater regulation. Until then, the future of unbacked tokens in the evolving crypto regulation landscape seems to hang in the balance.
Source: Cointelegraph
