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1、 October 2023 Future financial services regulatory regime for cryptoassets Response to the consultation and call for evidence 2 October 2023 Future financial services regulatory regime for cryptoassets Response to the consultation and call for evidence 4 Crown copyright 2023 This publication is lice

2、nsed under the terms of the Open Government Licence v3.0 except where otherwise stated.To view this licence,visit nationalarchives.gov.uk/doc/open-government-licence/version/3.Where we have identified any third party copyright information you will need to obtain permission from the copyright holders

3、 concerned.This publication is available at:www.gov.uk/official-documents.Any enquiries regarding this publication should be sent to us at public.enquirieshmtreasury.gov.uk ISBN:978-1-916693-49-4 PU:3363 5 Contents Table of Contents Chapter 1-Summary of feedback received 7 Chapter 2-Definition of cr

4、yptoassets and legislative approach 15 Chapter 3-Overview of the current regulatory landscape for cryptoassets 22 Chapter 4-Scope and sequencing of cryptoasset activities 27 Chapter 5-Regulatory outcomes for cryptoasset Issuance and Disclosures 38 Chapter 6-Regulatory outcomes for operating a crypto

5、asset trading venue 47 Chapter 7-Regulatory outcomes for cryptoasset intermediation activities 52 Chapter 8-Regulatory outcomes for cryptoasset custody 56 Chapter 9-Regulatory outcomes for market abuse 61 Chapter 10-Regulatory outcomes for operating a cryptoasset lending platform 71 Chapter 11-Call

6、for evidence:Decentralised Finance(DeFi)76 Chapter 12-Call for evidence:other cryptoasset activities 83 Chapter 13-Call for evidence:sustainability 89 6 Foreword The governments ambition to make the UK a global hub for cryptoasset technologies remains steadfast.To realise this ambition we must make

7、the UK a place where cryptoasset firms have the clarity needed to invest and innovate,and where customers have the protections necessary for confidently using these technologies.In February this year,the government published its consultation on the future financial services regulatory framework for

8、cryptoassets.We set out extensive proposals for a UK regime,including plans to regulate core activities such as custody and lending,and to bring centralised cryptoasset exchanges into financial services regulation for the first time.I am grateful to all of the firms and other interested parties that

9、 engaged so constructively with our consultation.The learnings gathered from our engagement have been invaluable for further informing our approach.While most aspects of our proposals were well-received by the large majority of respondents,we have modified certain features of our future framework to

10、 take onboard the evidence presented.With the future regulatory framework now taking clear shape and the Financial Services and Markets Act now passed,the UK is the obvious choice for starting and scaling a cryptoasset business.The UK is the largest financial centre globally outside of the United St

11、ates,and our tech industry is worth over$1tn;we are only the 3rd country to hit this valuation after China and the US.This combined with world-leading systems of law and financial regulation makes for a potent combination.Unsurprisingly the UK consistently ranks at or near the top of research report

12、s on crypto-readiness and crypto-friendliness.I am very pleased to present these final proposals for cryptoasset regulation in the UK on behalf of the Government.I look forward to our continued work with the sector in making our vision a reality for the UK as a global hub for cryptoasset technology.

13、Andrew Griffith MP,Economic Secretary to the Treasury 7 Chapter 1 Summary of feedback received Background 1.1 This document is the governments response to the consultation and call for evidence on the future financial services regulatory regime for cryptoassets(Consultation),which was published on 1

14、 February 2023 and closed on 30 April 2023.It outlines a summary of the Consultation questions and the responses received by HM Treasury,as well as the governments response,including how the consultation process influenced the further development of the policies and proposals consulted upon and next

15、 steps.Summary of feedback Profiling of respondents Source:HM Treasury analysis of responses received Crypto native firms and FinTechs,40%Traditional FS firms,10%Industry associations,27%Members of public or academia,12%Consumer groups/not-for-profits,3%Legal and consulting firms,4%Other,4%131131 TO

16、TAL NUMBER OF RESPONSES RECEIVED 8 1.2 HM Treasury received a total of 131 responses from a wide range of stakeholders.Around 50%of these were from firms and around 25%from trade associations.12%of responses were from members of the public or universities,4%from law and consulting firms,3%from not-f

17、or-profits/consumer associations and 4%came from other categories of respondent(e.g.media organisations).Amongst the firms that responded,there was a broad array of business models including blockchain network providers,crypto exchanges,crypto compliance firms,companies specialising in web3 gaming/c

18、ollectibles,crypto fund managers and specialist crypto custody providers.A number of traditional financial services firms also responded to the Consultation,including traditional banks and custodians,asset managers and payments providers.1.3 In addition,since publishing the proposals,HM Treasury has

19、 engaged with more than 80 organisations,mostly through a series of multilateral workshops and roundtables.The Financial Conduct Authority(FCA)also ran an engagement programme in parallel in anticipation of the rule making powers that will be granted to them.1.4 Since the publication of the original

20、 proposals there have been several important policy developments in the cryptoasset space:The Financial Services and Markets Act 2000(Financial Promotion)(Amendment)Order 2023(Financial Promotions SI)which brings financial promotions relating to qualifying cryptoassets within the existing financial

21、promotions regime-was made on 7 June 2023.1 The FCA published its Policy Statement on financial promotion rules for cryptoassets and the Guidance Consultation on cryptoasset promotions in June.2,3 The regime will come into force in October 2023.A Treasury Select Committee inquiry(“Fifteenth Report-R

22、egulating Crypto”)was published in May 2023.4 The governments response was issued by HM Treasury and published on 20 July 2023.5 The Financial Services and Markets Act 2023(FSMA 2023)received royal assent on 29 June 2023.6 FSMA 2023 contains important powers confirming the governments ability to spe

23、cify cryptoasset activities within the Financial Services and Markets Act 2000(Regulated Activities)Order 2001(RAO),and to designate activities as part of the Designated Activities Regime(DAR)as well as providing the regulatory powers necessary to 1 The Financial Services and Markets Act 2000(Financ

24、ial Promotion)(Amendment)Order 2023(legislation.gov.uk)2 https:/www.fca.org.uk/publications/policy-statements/ps23-6-financial-promotion-rules-cryptoassets 3 GC23/1:Guidance on cryptoasset financial promotions(fca.org.uk)4 https:/committees.parliament.uk/publications/39945/documents/194832/default/5

25、 https:/committees.parliament.uk/publications/40999/documents/199652/default/6 Financial Services and Markets Act 2023(legislation.gov.uk)9 deliver a regulatory regime for the use of digital settlement assets(DSA)in payments.The Law Commission published its Final Report on Digital Assets on 28 June

26、2023,7 recommending selective reform and development of the private law on digital assets to secure the UKs position as a global financial hub.HM Treasury published a consultation on the Digital Securities Sandbox(DSS)in July 2023.8 The DSS will be the first financial market infrastructure sandbox d

27、elivered under the powers granted as part of FSMA 2023 and will facilitate the testing and adoption of digital securities across financial markets.HM Treasury is also separately publishing an update on plans for the regulation of fiat-backed stablecoins(Stablecoins Update)which provides further clar

28、ity on activities relating to fiat-backed stablecoins and the delineation of phase 1 and phase 2 legislation.High-level sentiment analysis Source:HM Treasury analysis of responses received 1.5 In terms of general sentiment,around 80%of responses were broadly supportive of the governments overall app

29、roach.Approximately 10%had mixed or neutral feedback and the remaining 10%were critical of the proposals.7 https:/www.lawcom.gov.uk/project/digital-assets/8 Consultation on the Digital Securities Sandbox-GOV.UK(www.gov.uk)Mostly supportive,79%Neutral or mixed,12%Mostly critical,9%131131 TOTAL NUMBER

30、 OF RESPONSES RECEIVED 10 1.6 The most critical responses included those from respondents who fundamentally disagreed with the proposal to bring cryptoassets into the financial services regulatory perimeter(on the basis that they should be banned or,for example,treated in line with gambling regulati

31、on)or otherwise disagreed with fundamental aspects of the proposal(e.g.to focus regulation on the activities rather than the assets).1.7 Figure 1.D.below contains a summary of the most prominent themes from the consultation feedback.Figure 1.D Most prominent themes from the Consultation feedback#The

32、me Summary of external feedback on theme Chapter ref.Number of respondents 1 Non-Fungible Tokens(NFT)&utility tokens Clarify proposed treatment of NFTs and utility tokens especially on what constitutes a financial services use case CH 4 25+2 Geographic scope Give further consideration to the treatme

33、nt of overseas firms,including making clear the applicability(or not)of the Overseas Persons Exclusion(OPE),reverse solicitation,and intra-group exemptions CH 4 25+3 Phase 1 versus phase 2 Delineate phase 1 and phase 2 activities in more detail,and give further consideration to potential challenges

34、for firms and consumers CH 3,stablecoin policy note 25+4 Wholesale versus retail Make stronger distinctions between services provided to professional/sophisticated investors versus retail consumers(e.g.lending,venue disclosures)Various e.g.CH 5,6,7 and 10 25+5 Timelines Provide more clarity on timel

35、ines for phase 1 and phase 2,and seek to accelerate the CH 3 20+11#Theme Summary of external feedback on theme Chapter ref.Number of respondents overall implementation programme 6 Security tokens Make clear the proposed treatment of security tokens,and ensure overlapping regimes are avoided(e.g.thro

36、ugh an explicit carve-out)CH 2 and 8 20+7 Token scope Ensure cryptoasset definition used in secondary legislation is not too broad(e.g.make sure it excludes e-money,loyalty schemes,in-game money)CH 2 20+8 Staking Provide clarity on the definition and future treatment of staking and consider accelera

37、ting legislation process.Consider carve-out from the scope of the collective investment scheme(CIS)regime CH 12 20+9 Disclosures liability Ensure liability framework for disclosures is proportionate especially for tokens without an identifiable issuer CH 5 20+10 Market abuse(cross-venue)Consider a p

38、hased implementation approach towards market abuse surveillance obligations,recognising issues associated with cross-venue information sharing CH 9 15+11 FSMA authorisation process Streamline authorisation process in particular,consider appropriate transition pathways for firms registered with the F

39、CA under its anti-money-laundering regime and/or already authorised under Part 4A of the Financial CH 3 15+12#Theme Summary of external feedback on theme Chapter ref.Number of respondents Services and Markets Act 2000(FSMA)12 Custody scope Clarify definition and scope for future regulated cryptoasse

40、t custody activities,especially with regards to self-hosted wallets and third-party arrangements CH 8 15+13 Investment advice Reconsider sequencing of cryptoasset investment advice and portfolio management activities,and ensure these are included in the perimeter CH 12 15+14 SMEs Take steps to minim

41、ise barriers to entry for smaller firms e.g.through careful design of prudential requirements and issuance requirements CH 5 15+15 Cross-border enforcement Clarify how cross-border enforcement can work in practice to ensure fair and level playing field for UK-regulated firms CH 4,9 10+16 Permissionl

42、ess blockchains Ensure the regulatory framework appropriately reflects the risks associated with permissionless(public)versus permissioned(private)blockchains CH 2 10+17 Trading platform scope Clarify definition and scope for future regulated trading platform activities,e.g.with regards to airdrops

43、and decentralised exchanges Various -e.g.CH 5,6 and 11 10+18 Banning crypto Ban certain cryptoassets from retail consumer use-or treat them akin to gambling rather than bringing them into the CH 2 5+13#Theme Summary of external feedback on theme Chapter ref.Number of respondents financial services r

44、egulatory perimeter 19 Transitional disclosure arrangements Consider transitional disclosure arrangements for well-established tokens(e.g.Bitcoin)to differentiate them from recently issued tokens CH 5 5+20 International coordination on DeFi Avoid front-running international work on DeFi by imposing

45、a prescriptive domestic framework.CH 11 5+1.8 HM Treasury has considered this feedback carefully and is setting out some modifications to the original proposals set out in the Consultation,as well as some actions to be taken forward to provide further clarity on key areas of interest:HM Treasury is

46、publishing separately the Stablecoins Update which gives detail on the regulated activities and tokens which will be in scope for phase 1 and how these will be demarcated from phase 2 activities and tokens.Chapter 2 provides further guidance and reassurance regarding the intended outcomes for NFTs,u

47、tility tokens,security tokens and other data objects or things which respondents were concerned could unintentionally be captured.It confirms that the proposed regime does not intend to capture activities relating to cryptoassets which are specified investments that are already regulated e.g.securit

48、y tokens.It also clarifies that activities relating to truly unique or non-fungible NFTs that are more akin to digital collectibles or artwork than a financial services(in the general sense)or product should not be subject to financial services regulation.9 Chapter 3 includes updates on timelines fo

49、r phase 2 legislation and further information on the future FCA authorisation process for cryptoasset activities.Chapter 4 acknowledges the need to mitigate the fragmentation of cryptoasset liquidity that could arise from a restrictive location and market access policy.The government will proceed wi

50、th an 9 See chapters 2 and 4 for full details and qualifications 14 approach that facilitates access to international liquidity pools under specific circumstances.Chapter 5 restates the governments position on issuance and disclosures,noting that the recklessness and negligence liability standards w

51、ill enable market participants to manage their liability so long as they make reasonable enquiries.The government is also supportive of the use of publicly available information to compile appropriate parts of the disclosure/admission documents.10 Chapter 9 sets out a modified approach towards marke

52、t abuse obligations on cryptoasset exchanges,acknowledging the potential need for a staggered implementation for cross-venue data sharing obligations.Chapter 12 features a clear direction of travel and plan of action on staking to inform the governments view on a set of critical questions and provid

53、e regulatory clarity to industry in an accelerated way versus the previous plan.An engagement programme with external stakeholders has already been launched to inform this work.Other topics in Figure 1.D.are discussed in various chapters as indicated in the table.Where a significant number of respon

54、dents set out a proposed way forward that is different to the governments proposed approach,the rationale underpinning the governments decision is set out in this Response.10 Though persons preparing disclosure/admission documents would need to be clear on where this information originated and the l

55、evel of due diligence they had done over it 15 Chapter 2 Definition of cryptoassets and legislative approach Recap on original proposals from the Consultation 2.1 The Consultation set out governments intention to include the financial services regulation of cryptoassets within the regulatory framewo

56、rk established by FSMA,rather than develop a standalone bespoke regime,and to include cryptoassets in the list of specified investments in Part III of the RAO.This would require firms undertaking activities involving cryptoassets by way of business to be authorised by the FCA under Part 4A of FSMA a

57、nd make available the FCAs general rule-making powers.The Consultation also referred to the governments ability to use the DAR to designate certain activities in order to make regulations relating to the performance of that activity.The Consultation noted that it is not governments intention to expa

58、nd the definition of financial instrument in Part 1 of Schedule 2 to the RAO to include currently unregulated cryptoassets(though those cryptoassets that already qualify as financial instruments,such as security tokens,will continue to do so).2.2 HM Treasury received 80 responses to this question.94

59、%of responses agreed or generally agreed with the proposal,and 6%disagreed.Of those who supported the proposal,the main arguments in favour revolved around the fact that this would be a relatively pragmatic and flexible way of bringing cryptoasset activities into the regulatory perimeter,thereby add

60、ressing the most critical risks and creating a more level playing field for market participants.Respondents also noted that this approach would be broadly consistent with most other major jurisdictions.Question 1 Do you agree with HM Treasurys proposal to expand the list of“specified investments”to

61、include cryptoassets?If not,then please specify why.16 2.3 Among those that were generally in favour,it was however noted that the FSMA 2023 definition of cryptoasset was very broad and therefore there was a risk of creating overlapping regimes for existing specified investments(e.g.e-money,security

62、 tokens or tokenised deposits),inadvertently capturing data objects such as book entry tokens,or casting the net too broadly by capturing NFTs or utility tokens which are not used for one of the regulated activities in Table 4A of the Consultation within financial services markets or as a financial

63、services instrument(in the general sense),product or investment.2.4 Those that disagreed with the proposal were mostly of the view that cryptoassets(or at least certain types of cryptoassets such as unbacked cryptoassets)should not be given legitimacy through being incorporated into the financial se

64、rvices regulatory perimeter(the halo effect argument).Some of these respondents called for outright bans,or restrictions to prevent retail consumers from being able to purchase cryptoassets.Other suggestions included treating retail purchases of unbacked cryptoassets as a form of gambling.A small nu

65、mber of respondents agreed with the need to apply financial services regulation but disagreed with the mechanism of using the RAO,arguing that a standalone bespoke regime would offer greater flexibility and would be more proportionate given the nascency of the sector.Some respondents argued that HM

66、Treasurys approach should be much more cognisant of the risks associated with permissioned(private)vs permissionless(public)blockchains typically arguing that the risks associated with the latter were generally higher and different in nature.A few responses suggested that the legislative and regulat

67、ory framework should actually be fundamentally structured around this distinction.2.5 HM Treasury received 68 responses to this question.82%of respondents agreed or generally agreed with the proposal,while 10%disagreed and 7%of responses were neutral or mixed.2.6 Those who were generally supportive

68、of the proposal noted that applying an existing regime to cryptoassets a relatively new asset class with unique features and risks would likely result in unsuitable and potentially onerous regulation.Even among supportive responses,however,there was some concern that not including cryptoassets withi

69、n the definition of financial instruments could lead to uncertainty,including but not limited to how the cryptoassets regime and the financial instruments regime would interact.Question 2 Do you agree with HM Treasurys proposal to leave cryptoassets outside of the definition of a financial instrumen

70、t?If not,then please specify why.17 2.7 At least one respondent queried how the proposal not to include cryptoassets within the definition of financial instruments would impact other legislation using that term.This is not dealt with in this chapter but for further information see chapter 8.Other re

71、sponses highlighted the need to ensure consumers who purchase cryptoassets benefit from the same level of safeguards as the holders of assets that do fall within the definition of financial instruments.2.8 Those who disagreed with the proposal generally did so on the basis that it would be a positiv

72、e step to bring cryptoassets within the scope of the existing,well-developed regime for financial instruments.At least one response noted that the list of financial instruments is already relatively expansive and queried why given the breadth of assets covered it could not also extend to cryptoasset

73、s.2.9 HM Treasury received 53 responses to this question.Of those,38%indicated that there were possible challenges,while 30%of responses were mixed or uncertain.32%of respondents did not identify any potential challenges.2.10 A common theme among responses was the need for greater clarity on when HM

74、 Treasury would consider using the DAR to legislate for cryptoasset activities and,where it decided to do so,what the regime would look like.Some respondents suggested that HM Treasury should be required to consult in circumstances where it proposed to use the DAR to provide greater clarity to indus

75、try.Some respondents recognised the benefits offered by the DAR in terms of flexibility,but nevertheless felt there was some risk in two regimes the DAR and the RAO coexisting and potentially overlapping.At least one respondent queried how monitoring and enforcement would work under the DAR regime a

76、nd made the point that if overseas enforcement under the DAR was more difficult,that might strengthen the case for the government/regulators to require cryptoasset firms to establish in the UK.HM Treasurys assessment was that many of the concerns raised arose from lack of familiarity with the DAR,gi

77、ven its novelty.Most respondents pointed out potential challenges and risks in a constructive way but did not seem to be implying that the use of the DAR was unworkable.2.11 Among those responses that were neutral or mixed,there was likewise a call for greater clarity as to how and when the DAR woul

78、d be used.At least one respondent highlighted the need to ensure the DAR provided consumers with safeguards equivalent to those in the RAO.Question 3 Do you see any potential challenges or issues with HM Treasurys intention to use the DAR to legislate for certain cryptoasset activities?18 Government

79、 response 2.12 In general,the government intends to proceed as proposed in the Consultation.In particular,the government will expand the list of specified investments in Part III of the RAO and thereby require firms undertaking relevant activities involving cryptoassets by way of business to be auth

80、orised by the FCA under Part 4A of FSMA.FSMA is well-established and understood by firms.In line with feedback received,the government continues to consider that developing a fully bespoke regime outside of the FSMA framework would risk creating an un-level playing field between cryptoasset firms an

81、d the traditional financial sector.The governments approach would also be in line with the approach taken by numerous other jurisdictions.2.13 Likewise,the government does not plan to expand the definition of financial instruments in Part 1 of Schedule 2 of the RAO to include presently unregulated c

82、ryptoassets.Notwithstanding some limited feedback to the contrary,the government agrees with the majority of respondents that retrofitting the existing financial instruments regime to cryptoassets would likely result in unsuitable and potentially onerous regulation.2.14 The government considers that

83、 the DAR is a strong,flexible tool that will likely form part of the delivery of the future financial services regulatory regime for cryptoassets.Definition of cryptoassets 2.15 The government has received a high volume of feedback both in responses to the Consultation and through wider stakeholder

84、engagement to the effect that the definition of cryptoassets in the Consultation is overly broad.As set out in Chapter 2 of the Consultation,the definition(which is taken from FSMA 2023)is drawn broadly so as to capture all current types of cryptoasset and ensure the government has the power to regu

85、late not only those types of cryptoasset that currently exist but also those that may exist in future.2.16 The Consultation noted that future financial services regulation of cryptoassets created using HM Treasurys powers will typically apply to a particular subset of cryptoassets depending on the m

86、atter being regulated and will accordingly use a narrower definition to capture these.That notwithstanding,the government is keen to reassure industry regarding some specific examples raised in feedback.The precise legal mechanism for distinguishing between tokens that are in and out of scope will b

87、e set out in the relevant secondary legislation and FCA rules.2.17 As a general principle,the governments intention is that cryptoassets not being used for one of the regulated activities in Table 4A of the Consultation within financial services markets or used as a financial services instrument(in

88、the general sense),product or investment should fall outside the future financial services regulatory 19 regime.11 Such cryptoassets may,though,still fall within existing regulated activities or financial instruments,products or investments,such as where they are the underlying asset or property for

89、 a CIS.Where firms have specific concerns over whether a particular cryptoasset or product would fall within the regime,a useful heuristic may be to consider how a similar product or activity(if there is one)would be treated in the traditional finance context(in line with the principle of“same risk,

90、same regulatory outcome”).2.18 Likewise,the government does not intend to capture cryptoassets which are specified investments that are already regulated.This includes,but may not be limited to,security tokens representing debt or equities.Insofar as certain cryptoassets fall within the scope of alr

91、eady applicable existing regulatory regimes,they will largely continue to be regulated in line with the relevant existing rules and regulations.For example,firms carrying out regulated activities involving security tokens will need to obtain relevant permissions or fall within exemptions under the r

92、egulatory frameworks applicable to traditional financial services,and could be subject to existing requirements such as those relating to issuance.However,the unique qualities of cryptoassets will likely require a small number of specific adjustments to these existing regimes(for instance around cus

93、tody dealt with in more detail in Chapter 8)but the government does not expect these to be extensive.To the extent specific changes are required to accommodate for distributed ledger technology(DLT),these will likely be taken forward through the DSS initiative.2.19 The government received a signific

94、ant number of responses requesting further clarity on the proposed treatment of NFTs and utility tokens.These categories of token are discussed in Chapter 4.Calls to ban cryptoassets or regulate cryptoassets as gambling 2.20 The government acknowledges the responses it received suggesting that certa

95、in cryptoassets should be banned or treated as gambling.As set out in its response to the Treasury Select Committee,12 the government firmly disagrees with the suggestion that retail trading and investment activity in unbacked cryptoassets should be regulated as gambling rather than a financial serv

96、ice.Such an approach would run counter to globally agreed recommendations from international organisations and standard setting bodies(SSBs)and would risk 11 At various points,this document refers to certain categories of cryptoassets or activities falling outside the future financial services regul

97、atory regime for cryptoassets or includes wording to that effect.Such references refer to the regime that is the primary focus of this Consultation,namely that governing new regulated activities under the RAO and/or designated activities under the DAR.Such wording should not be taken to mean that sa

98、id cryptoassets or activities might not be regulated under other regulatory regimes either now or in the future(including but not limited to the financial promotions regime,applicable existing regulatory regimes for traditional securities or generally applicable areas of law such as in relation to a

99、nti-money laundering/counter-terrorism financing or fraud).12 https:/committees.parliament.uk/publications/40999/documents/199652/default/20 misalignment with international standards and the approaches of other major jurisdictions,including the EU.2.21 Regulating cryptoasset activities as gambling w

100、ould also risk creating unclear and overlapping mandates between financial regulators and the Gambling Commission.Furthermore a system of gambling regulation could fail to appropriately mitigate many of the risks identified in the Consultation,including those associated with market manipulation,prud

101、ential arrangements,and deficiencies in core financial risk management practices.These are more appropriately addressed through financial services regulation.2.22 The proposal to ban cryptoassets similarly fails to address other risks associated with the industry.There would be adverse consequences

102、in terms of innovation,and there is no guarantee that banning cryptoassets would protect consumers,given high public demand and the availability of services in other jurisdictions.Indeed,many countries that have banned cryptoassets or significantly restricted their uses have higher adoption rates th

103、an the UK.2.23 The government considers that having robust and effective regulation will boost innovation,by giving people and businesses the confidence they need to use new technologies safely.By making the UK a safe place for the use and development of these technologies,the UK can help attract in

104、vestment,generate new jobs,benefit from tax revenues,and promote innovation in new products and services.Permissioned(private)vs permissionless(public)blockchains 2.24 For the purpose of activities addressed in this Consultation,the government aims to create the right conditions for crypto and digit

105、al asset innovation on both private and public blockchains to flourish in a safe environment.These proposals allow for certain activities(phase 2 activities listed in Table 4A)to be conducted across all blockchains subject to certain controls and disclosures being put in place.13The government propo

106、ses to address the risks in a flexible manner through,for example,disclosure/admission requirements and obligations on cryptoasset service providers.Regulators will continue to consider the risks of using these new technologies to appropriately mitigate the risks they pose.2.25 The detailed contents

107、 of disclosure/admission documents will be defined by cryptoasset trading venues,subject to FCA principles(see Chapter 5).However,this could include,for example,information about a tokens underlying code and network infrastructure,known vulnerabilities,risks(including cybersecurity and governance ri

108、sks)and dependencies(e.g.reliance on third party or decentralised blockchains or other infrastructure).13 Note that certain regulatory authorities such as Basel Committee on Banking Supervision(BCBS)recommend a different approach for permissionless blockchains when they pertain to stablecoins issued

109、 by banks 21 2.26 Furthermore,the authorisation and supervision of firms undertaking phase 2 regulated cryptoasset activities which will be designed in more detail through FCA-led consultations and rulebooks will consider operational risks(see Chapters 6,7,8 and 10).In line with International Organi

110、sation of Security Commissions(IOSCO)recommendations firms will be required to disclose material sources of operational and technological risks and have appropriate risk management frameworks in place to manage and mitigate such risks.Again,this would likely need to cover risks arising from dependen

111、cies on specific blockchains and networks.22 Chapter 3 Overview of the current regulatory landscape for cryptoassets Recap on original proposals from the Consultation 3.1 The Consultation set out the governments expectation that those categories of cryptoasset that already fall within the perimeter

112、of an existing regulatory regime(e.g.those that already qualify as specified investments or fall within the definition of a financial instrument in Part 1 of Schedule 2 to the RAO or as e-Money)will continue to be regulated under those regimes,rather than under the future financial services regulato

113、ry regime for cryptoassets.In terms of the delineation between phases 1 and 2,the Consultation set out that phase 1 would cover the regulation of activities relating to fiat-backed stablecoins used for payment,while phase 2 would cover the broader cryptoasset regime.3.2 The Consultation also set out

114、 the expectation that once the cryptoasset regime is in place,firms undertaking regulated cryptoasset activities would likely need to adhere to the same financial crime standards and rules under FSMA that apply to equivalent or similar traditional financial services activities.Relatedly,the introduc

115、tion of an authorisation regime under FSMA for persons carrying out certain activities involving cryptoassets means that crypto firms already registered with the FCA under the Money Laundering,Terrorist Financing and Transfer of Funds(Information on the Payer)Regulations 2017(MLRs)and carrying out t

116、hose activities will need to also seek authorisation from the FCA under the new FSMA-based regime.This is because businesses will need to be assessed against a wider range of measures than they were as part of the MLR registration process.Question 4 How can the administrative burdens of FSMA authori

117、sation be mitigated for firms which are already MLR-registered and seeking to undertake regulated activities?Where is further clarity required,and what support should be available from UK authorities?23 3.3 HM Treasury received 54 responses to this question.Several respondents made the point that it

118、 is important for the regimes credibility that it be seen to be robust,rather than light touch.Multiple respondents also praised the FCAs recent feedback statement on good and poor applications.14 That notwithstanding,respondents offered a wide range of proposals to mitigate the burden of applying f

119、or FCA authorisation for firms that are already MLR-registered.Common suggestions included:transitional arrangements(e.g.a temporary permissions regime)to enable firms to continue undertaking business activities while their authorisation applications are processed avoiding the need for firms to re-s

120、ubmit information in their authorisation application that was previously submitted as part of their MLR registration application clear guidance from the FCA on timelines and expected content of applications,potentially including detailed checklists,worked examples,and Q&A documents a collaborative a

121、pproach between applicants and the FCA(e.g.providing a facility to correct minor errors or omissions rather than requiring applications to be withdrawn,ongoing engagement with authorisation case officers,and an obligation for the FCA to provide a statement of reasons when it asks for an application

122、to be withdrawn)a requirement for the FCA to anonymously publish metrics on the outcome of applications ensuring the FCA is adequately resourced to allow the timely processing of applications 3.4 At least one respondent suggested the authorisation applications of firms registered under the MLRs coul

123、d be prioritised,while another highlighted the need to avoid a first mover advantage for firms who are authorised early by virtue of being the first reviewed.3.5 Finally,a small number of respondents proposed access to a streamlined variation of permission route for firms already authorised for one

124、or more existing activities.At least one respondent went further and proposed automatic transition to the new regime for firms that have an existing Part 4A authorisation and are also registered under the MLRs.14 https:/www.fca.org.uk/firms/cryptoassets-aml-ctf-regime/cryptoasset-aml-ctf-regime-feed

125、back-good-and-poor-quality-applications Question 5 Is the delineation and interaction between the regime for fiat-backed stablecoins(phase 1)and the broader cryptoassets regime(phase 2)clear?If not,then please explain why.24 3.6 HM Treasury received 50 responses to this question.66%of responses agre

126、ed or generally agreed that that the delineation and interaction between the regimes was clear,while 26%disagreed.8%of respondents were either neutral on the point or their view was mixed.3.7 A common theme across the responses was that industry would appreciate greater clarity on the definitions of

127、,and distinctions between,regulated stablecoins and cryptoassets more broadly.Likewise,many respondents were not clear on what was meant by stablecoins that are“used as a means of payment”.They highlighted that unbacked cryptoassets as well as so-called stablecoins are capable of being(and indeed ar

128、e already)used for payments,as well as the fact that the way in which a particular stablecoin or cryptoasset is used can change over time and differ from user to user.3.8 There was also some uncertainty around whether firms who undergo an authorisation process for stablecoin custody activity as part

129、 of phase 1 would also be required to undertake a separate authorisation process for other stablecoin activities or wider cryptoasset activities once they come to be regulated as part of phase 2,with some suggesting this would be unduly burdensome.A small number of respondents also expressed concern

130、 that the phased approach to regulation would lead to confusion among consumers as to what categories of cryptoassets/stablecoins are and are not regulated at a given time.3.9 HM Treasury received 54 responses to this question.67%of respondents felt the phased approach would or could create potentia

131、l challenges,while 20%disagreed.13%of respondents were either neutral on the point or their view was mixed.3.10 Several respondents were concerned that the phased introduction of regulations would create uncertainty for the industry.In particular,and as noted above in respect of question 5,responden

132、ts observed that some firms undertake activities proposed to be regulated under both phase 1 and phase 2.If it is necessary to undertake separate authorisation processes in respect of these then this could be unduly burdensome.Additionally,some activities proposed to be regulated in different phases

133、(e.g.stablecoin custody and exchange)are interdependent.At least one respondent asked what the phased approach would mean for firms undertaking both activities at the time when some parts of their business are regulated and others are not.This could also lead to negative outcomes for consumers who m

134、ay form the impression that all a firms activities are regulated,when in fact only some are.Question 6 Does the phased approach that the UK is proposing create any potential challenges for market participants?If so,then please explain why.25 3.11 Several respondents expressed more general concerns t

135、hat the phased approach would lead to a drawn-out process,with multiple responses requesting greater clarity on the timescales for each phase.The delay between phases could also lead to unintended gaps and/or conflicting definitions.Several respondents noted that delays would have adverse consequenc

136、es for UK competitiveness.3.12 Respondents also addressed prioritisation of particular activities within the phased approach.Different respondents sought different approaches.Some activities(e.g.staking)were broadly felt to merit a higher priority,while at least one respondent disagreed with the pro

137、posal to prioritise stablecoins within phase 1.Several respondents highlighted DeFi as one area where the governments proposed prioritisation was appropriate,with the approach allowing the understanding of the market and efforts at international cooperation to develop.Government response FSMA author

138、isation process for regulated cryptoasset activities 3.13 Regarding the FSMA authorisation process,the new regime will be broader in scope than the current MLR registration regime and will include aspects of regulatory compliance that may not have previously been assessed.Authorisation will therefor

139、e not be automatically granted to MLR registered firms.However,the FCA will provide more detail on what the assessment will involve in due course and will also consider the regulatory histories of all applicant firms in those assessments.Similar to the current MLR registration regime,the FCA will se

140、ek to(i)provide feedback on good and poor-quality applications for the new regime as expeditiously as possible(ii)engage with the consultants and legal advisors supporting firms to contribute to the regulatory clarity that professional services are able to support applicant firms with,and(iii)provid

141、e data on the number of applications received and the outcomes of those applications.3.14 In line with the proposals previously set out,the expectation is for firms that have an existing authorisation under Part 4A of FSMA(for example those authorised to operate a Multilateral Trading Facility(MTF)t

142、o apply for a Variation of Permission(VoP),rather than having automatic permissions or exemptions to enable them to undertake newly regulated cryptoasset activities.This is deemed important since regulatory regimes for cryptoasset activities will be tailored according to the specific risks and chara

143、cteristics of cryptoasset markets.A pure lift and shift approach and,by extension,automatic granting of permissions for firms undertaking similar but not identical activities relating to existing specified investments would not be appropriate.Such firms are however likely to benefit from their exist

144、ing capabilities and supervisory history as they undertake the VoP process.3.15 The same would apply to a firm which had established FSMA authorised status for phase 1 regulated activities relating to fiat-backed 26 stablecoins.Such a firm would be expected to apply for a VoP if seeking to undertake

145、 additional regulated activities that fall under the scope of phase 2.Delineation between phase 1 and phase 2 activities 3.16 On the delineation between phase 1 and phase 2 activities and the associated challenges,readers are pointed towards the separate Stablecoins Update for further clarity on thi

146、s.By way of summary,the Stablecoins Update outlines the governments intention to prioritise(i)the creation of FCA regulated activities under the RAO for the issuance and custody of fiat-backed stablecoins which are issued in the UK and(ii)the regulation of payment services relating to certain fiat-b

147、acked stablecoins where used in a UK payment chain under the Payment Services Regulations 2017.This creates the framework for a subset of fiat-backed stablecoins to safely operate and grow in the UK under the payments regime,within a regulated environment.This approach also focuses on stablecoin pay

148、ments,with custody for the majority of other cryptoassets and other core activities(e.g.operating an exchange)generally coming in phase 2.The government expects that this will provide a degree of optionality and flexibility for firms wishing to undertake phase 1 activities as early adopters as well

149、as those with business models more focused on phase 2-only activities.The Stablecoins Update also gives further detail on the legislative approach on custody for all cryptoassets-since the government envisages that the same framework will likely be extended and expanded to the broader perimeter of c

150、ryptoassets under phase 2.3.17 Respondents who raised other challenges around the governments proposed prioritisation of activities(for example those that called for acceleration of certain activities in future phases)are pointed towards chapter 4,and also chapter 12 which provides updates on the go

151、vernments approach towards staking activities,cryptoasset investment advice and mining,amongst other activities.Timelines 3.18 In response to calls for further clarity on timelines,and to accelerate the overall implementation programme,the governments aim is for phase 2 secondary legislation to be l

152、aid in 2024,subject to Parliamentary time.27 Chapter 4 Scope and sequencing of cryptoasset activities Recap on original proposals from the consultation 4.1 The Consultation set out the governments intention to create a number of new regulated or designated activities tailored to the cryptoasset mark

153、et where those activities mirror,or closely resemble,regulated activities performed in traditional financial services.The Consultation also set out a list of illustrative cryptoasset activities to bring into the regulatory perimeter and a proposed sequence for these activities across several phases.

154、The Consultation noted the intention to capture cryptoasset activities provided in or to the United Kingdom and set out a number of challenges the government has identified in connection with different business models(namely those with a significant degree of vertical integration)and certain categor

155、ies of cryptoassets(namely commodity-linked tokens,so-called algorithmic stablecoins and stablecoins backed by cryptoassets,NFTs,and utility tokens).4.2 HM Treasury received 66 responses to this question.67%of respondents agreed or generally agreed with the proposed territorial scope but 20%disagree

156、d.14%of responses were neutral or mixed.4.3 Those who broadly agreed with the proposal to capture activities both in and to the UK observed that many of the recent market failures have involved overseas firms.They saw the proposed territorial scope as necessary to protect consumers and ensure regula

157、tors have oversight of firms that are domiciled overseas while providing services to UK consumers.4.4 Some respondents both those that generally agreed and disagreed with the proposed territorial scope of the regime-queried how the UK would in practice enforce regulations over firms in other jurisdi

158、ctions conducting activities in the UK.They observed that doing so will require cooperation between national regulators.Question 7 Do you agree with the proposed territorial scope of the regime?If not,then please explain why and what alternative you would suggest.28 4.5 Several of those respondents

159、that disagreed with the proposal considered capturing activities in or to the UK represented a departure from the territorial scope of the regimes governing regulated activities involving traditional assets.There was some concern that capturing activities undertaken in jurisdictions other than the U

160、K would risk causing confusion or subjecting businesses to conflicting regulations.At least one respondent was concerned that subjecting international firms to UK regulation might be seen as unduly onerous and that overseas firms may choose to simply ignore UK regulation while continuing to offer se

161、rvices to UK consumers.4.6 A frequent theme across responses was the call for government to expand the scope of the OPE to cover regulated activities relating to cryptoassets as it does with regulated activities relating to certain traditional assets.Additionally,or in the alternative,many responden

162、ts were in favour of the future regime making provision for reverse solicitation and/or equivalence arrangements with other jurisdictions.4.7 HM Treasury received 61 responses to this question,of which 80%agreed or generally agreed with the list of activities.7%of respondents disagreed,with 13%of re

163、sponses being neutral or mixed.4.8 Respondents supportive of the governments proposals noted with agreement that the government is proposing to regulate activities that are similar to those that exist in traditional financial services in a similar manner.There were,however,a number of activities tha

164、t government did not propose to bring within the regulatory perimeter that respondents including those who were generally supportive of the proposals felt should be included.Many respondents requested that the regulatory treatment of staking should be clarified as a priority,rather than reserved for

165、 future phases of regulation.Additionally,some raised discretionary portfolio management services and the provision of investment advice as activities that could give rise to harms to consumers if undertaken improperly.4.9 Both those respondents who were generally supportive and those who were gener

166、ally critical of the proposals raised the need for greater clarity over the scope of certain activities.Respondents also highlighted how activities that might on the surface appear to be broadly analogous to traditional financial services activities would differ in the cryptoasset context.4.10 Some

167、respondents urged the government not to be unduly hasty about bringing DeFi activities within the regulatory perimeter.Their concern was to avoid misinterpreting or mis-categorising the Question 8 Do you agree with the list of economic activities the government is proposing to bring within the regul

168、atory perimeter?29 underlying nature of DeFi activities and thereby risk discouraging innovation in this rapidly evolving space.4.11 Some respondents felt strongly that certain activities should be permanently left outside the financial services regulatory perimeter.Mining and validation activities

169、were frequently mentioned examples.Some respondents also disagreed with the proposals in the Consultation on the basis that banning cryptoasset activities would be a preferable approach to regulating them.4.12 51 responses were submitted to this question.69%agreed with the proposed phasing but 25%di

170、sagreed.6%of responses were either neutral or mixed.4.13 The majority of responses to this question were broadly supportive of the governments proposals.That notwithstanding,alternative proposals for prioritisation did emerge as themes across multiple responses.As discussed in paragraph 4.8 above,se

171、veral respondents were concerned at the proposal to omit or delay the regulation of portfolio management activities and the provision of investment advice in connection with cryptoassets.4.14 Likewise,a high number of respondents encouraged the government to prioritise providing clarity on the treat

172、ment of staking.Those who did so emphasised the importance of staking as part of the technology underpinning the sector,sought to distinguish it from the provision of a financial service,and highlighted the potential competitive advantage the UK could derive from being an early mover in this space.4

173、.15 Smaller numbers of respondents felt that higher priority should be afforded to other activities,including custody of unbacked cryptoassets and the development of rules for the admission of new tokens(both currently slated for phase 2).A smaller group raised concerns with the proposed prioritisat

174、ion on the basis that a ban would be preferable to regulation.4.16 Across a range of different responses,a key theme was the need for government to act quickly and minimise delay between phases.In general,respondents were clear that they would appreciate additional clarity on the governments plans a

175、round the timing of the different phases.Question 9 Do you agree with the prioritisation of cryptoasset activities for regulation in phase 2 and future phases?30 4.17 53 responses were received to this question.74%of those agreed or generally agreed with the assessment.6%disagreed and 21%were neutra

176、l or mixed.Responses to this question mostly agreed with the challenges and risks identified in the Consultation.That notwithstanding,responses did include a number of additional challenges and risks respondents felt the government ought to consider in connection with vertically integrated business

177、models.In particular,respondents noted:(i)that platforms requiring the use of a native token could increase risks for consumers,(ii)that the predominance of a small number of vertically integrated firms risks could have a negative effect on competition and innovation(as newer,smaller firms struggle

178、to compete),and(iii)the potential for large-scale market disruption or the failure of a large firm to lead to systemic risk and contagion effects.Some respondents also queried how any requirements on vertically integrated firms would be applied to decentralised entities.4.18 While it is important to

179、 acknowledge the challenges and risks associated with vertically integrated firms,a significant number of respondents noted these risks and challenges are not unique to cryptoasset firms.Responses frequently noted the same or similar risks are present-and with appropriate governance and risk managem

180、ent can be effectively mitigated-in the traditional financial sector.4.19 Those responses that were more critical of the governments assessment of the challenges and risks expressed a preference for restrictions or bans on cryptoassets or noted that the recent failures of large cryptoasset exchanges

181、 appear to have been the result of fraudulent activity and the failure to safeguard client funds rather than risks specifically associated with vertically integrated business models.4.20 Relatively few responses(24)were submitted to this question.Among those,50%of those responses supported the propo

182、sition that existing commodity linked tokens would either fall within scope of existing regulatory frameworks as they apply to the underlying commodity or could be adequately catered for through the broader cryptoasset regime.Only 17%of responses disagreed(with the Question 10 Do you agree with the

183、assessment of the challenges and risks associated with vertically integrated business models?Should any additional challenges be considered?Question 11 Are there any commodity-linked tokens which you consider would not be in scope of existing regulatory frameworks?31 remaining 33%neutral,mixed or un

184、sure).That notwithstanding,some responses recognised that the pace of development in this area means this will need to be kept under review with commodity-linked tokens considered on a case-by-case basis.4.21 53 responses were received to this question.71%of those agreed or generally agreed with the

185、 proposal.13%disagreed and 15%were neutral or mixed.Responses to this question mostly agreed that so-called algorithmic stablecoins and crypto-backed tokens should be regulated in the same way as unbacked cryptoassets.Those responses that supported the proposal tended to oppose any suggestion of equ

186、ivalence between fiat-backed stablecoins and other types of tokens which seek to maintain a stable value.Supportive responses also commonly noted that regulating algorithmic stablecoins and crypto-backed tokens in the same way as unbacked cryptoassets was in line with the principle of“same risk,same

187、 regulatory outcome”.4.22 Responses that opposed the proposal observed that regulating algorithmic stablecoins and crypto-backed tokens as unbacked cryptoassets would risk divergence with the European Unions approach under the Markets in Crypto-Assets Regulation(MiCA).Some responses also noted that

188、it is not possible at present to say how algorithmic stablecoins can or might be used in future and bespoke category would therefore be appropriate.At least one response suggested it might be beneficial to determine the approach to regulation on a case-by-case basis,taking into account the unique ch

189、aracteristics,design and function of a token.4.23 HM Treasury received 62 responses to this question.65%of respondents felt the proposed treatment was not clear,compared to 19%who thought it was entirely or generally clear.A further 16%of responses were mixed or neutral on the question.4.24 A signif

190、icant proportion of respondents felt the definitions of NFT and utility token in the Consultation were not clear,either because they were factually incorrect or not sufficiently exhaustive.Likewise,many respondents objected to the statement that“all cryptoassets featured Question 12 Do you agree tha

191、t so-called algorithmic stablecoins and crypto-backed tokens should be regulated in the same way as unbacked cryptoassets?Question 13 Is the proposed treatment of NFTs and utility tokens clear?If not,please explain where further guidance would be helpful.32 in Box 2.A including NFTs and utility toke

192、ns would have the potential to be in included in the future regulatory perimeter if they were used in one of the activities in Table 4A”.Respondents submitted that some activities in Table 4A,such as custody,might be necessary for an NFT or utility token and thereby bring NFTs within the scope of th

193、e future regulatory regime without introducing a recognisable financial services activity.4.25 Other respondents suggested a bespoke regime for NFTs would be necessary.Some also suggested that if governments intention was generally not to capture NFTs,then it would need to publish regular guidance o

194、n the features that would differentiate an NFT from other categories of cryptoasset.4.26 Finally,some respondents noted that if NFTs were ultimately not captured within the financial services regulatory regime,it would be important to ensure they are subject to relevant anti-money laundering legisla

195、tion to mitigate the money laundering risks NFTs share with similar non-financial services asset classes,such as artworks.Government response Scope of regulated cryptoasset activities 4.27 By and large,the government intends to implement the territorial scope of the future regulatory regime as propo

196、sed in the Consultation.This means subject to the token category exceptions discussed in more detail below a person(whether legal or natural)will generally be required to be authorised by the FCA under Part 4A of FSMA if:they are undertaking one of the regulated activities;by way of business;and the

197、y are providing a service in or to the UK.Table 4.A Proposed scope of cryptoasset activities to be regulated under Phase 2 Activity category Phase 2 sub-activities (indicative,non-exhaustive)Chapter Issuance activities Admitting a cryptoasset to a cryptoasset trading venue Chapter 5 Making a public

198、offer of a cryptoasset Chapter 5 Exchange activities Operating a cryptoasset trading venue which supports:(i)the exchange of cryptoassets for other cryptoassets(ii)the exchange of cryptoassets for fiat currency(iii)the exchange of cryptoassets for other assets(modities)Chapter 6 33 Activity category

199、 Phase 2 sub-activities (indicative,non-exhaustive)Chapter Investment and risk management activities Dealing in cryptoassets as principal or agent Chapter 7 Arranging(bringing about)deals in cryptoassets Making arrangements with a view to transactions in cryptoassets Making arrangements with a view

200、to transactions in cryptoassets Lending,borrowing and leverage activities Operating a cryptoasset lending platform Chapter 10 Safeguarding and/or administration(custody)activities Safeguarding or safeguarding and administering(or arranging the same)a cryptoasset other than a fiat-backed stablecoin a

201、nd/or means of access to the cryptoasset15(custody)Chapter 8 4.28 On the topic of market access,the government shares industrys view of the benefit of working towards deference/equivalence type arrangements and is committed to cooperating with international partners including through the UKs ongoing

202、 work with standard setting bodies such as IOSCO and the Financial Stability Board(FSB)to deliver a framework that can accommodate this.4.29 However,it is recognised that the conditions required for equivalence/deference are not currently in place.Given this,an approach is required that will facilit

203、ate access to global liquidity pools under specific circumstances(for example where the global liquidity pool is being operated in a jurisdiction which is meeting international recommendations and standards).This would apply on a time-limited basis for the interim period before appropriate equivalen

204、ce/deference type arrangements are in place.4.30 Such an arrangement is important to ensure that UK consumers achieve satisfactory execution outcomes for their cryptoasset orders.A highly restrictive location and market access policy would be unlikely to achieve this due to limited order book depth(

205、since a UK order would only be able to be matched against another UK order).4.31 A way of achieving this could be to permit UK firms who are operating a regulated cryptoasset trading venue in an overseas jurisdiction to be able to apply for authorisation for a UK branch extension of their overseas e

206、ntity.The branch could be authorised to specifically handle trade matching and execution activity.15 e.g.a wallet or cryptographic private key 34 4.32 The specifics of these requirements on physical location would be determined by the FCA(and informed by the FCAs framework for international firms)in

207、 line with existing practice in the UK.4.33 For clarity,the government does not support expanding the OPE to cover cryptoassets.The cryptoasset industry is growing and developing rapidly,but the context of cryptoasset markets is not the same as those for traditional financial products to which the O

208、PE already applies.The governments position is that firms dealing directly with UK retail consumers should be required to be authorised irrespective of where they are located.Prioritisation of activities 4.34 In general,the government intends to proceed on the basis of the priorities as set out in t

209、he Consultation.A significant number of respondents said the government should bring forward its work on staking(originally proposed for future phases)and that portfolio management and the provision of investment advice should be included as regulated activities.Both these issues are dealt with in C

210、hapter 12.The government will bring forward its work on staking but does not agree that portfolio management and the provision of investment advice on cryptoassets should be brought within the regulatory perimeter at this stage.This latter position will be kept under review.Vertically integrated bus

211、iness models 4.35 The government intends to regulate vertically integrated business models as envisaged in the Consultation.At the most basic level,this means vertically integrated businesses should be required to follow the relevant regulatory rules for each regulated activity undertaken.4.36 While

212、 there are risks to vertical integration it should be possible to mitigate said risks with appropriate governance,controls and risk management systems,as happens in the traditional financial sector.4.37 As discussed in Chapter 6,the government does not intend to explicitly endorse or prohibit specif

213、ic business models or corporate structures in legislation.Doing so at this point would limit the flexibility of a future regulatory regime at a stage when business models are still evolving at pace.It could also shape and influence market structures in unintended or suboptimal ways.4.38 However,the

214、governments expectation is that firms will be required to evidence that conflicts of interest and risks to market integrity are appropriately managed within their specific business models as they seek authorisation.In that regard,trading platforms that admit self-issued tokens or that intend to unde

215、rtake proprietary trading against customer orders,will require particular scrutiny and ultimately the FCA may determine that some conflicts are impossible to manage.It should be noted that the FCA already has rules on conflicts of interest and will be considering and consulting on how these rules sh

216、ould apply to cryptoasset firms.Managing conflicts of 35 interest is also one of the FCAs Principles for Business to which all authorised persons are required to adhere.4.39 The government recognises that certain firms undertaking several regulated activities may present a higher risk to the wider e

217、cosystem in the event of failure and the government and regulators will continue to consider whether and how such firms should be subject to proportionate prudential requirements.The requirements will be addressed in detailed FCA rules,but the issue is also being explored in the DSS and could be exp

218、lored by further Financial Market Infrastructure(FMI)sandboxes in particular the example of where a firm operates a MTF/organised trading facility(OTF)and simultaneously acts a central securities depository.4.40 Additionally,as proposed in the Consultation,trading venues will be required to keep and

219、 make available at all times accurate and comprehensive order book data for relating to trading on their exchanges to support effective market abuse and systemic risk monitoring.Activities relating to asset-referenced tokens 4.41 Very few respondents identified the need for a bespoke framework for t

220、hese tokens,and the government notes this continues to be a small percentage of the market in terms of value and trading volumes.On that basis,as set out in the Consultation,to the extent these products do not meet the definition of an existing specified investment or collective investment scheme bu

221、t do meet the relevant definition of cryptoasset,they will be regulated under the wider regime for unbacked cryptoassets,and other relevant legislation including the financial promotions regime.Where asset-referenced tokens do meet the definition of a specified investment or a collective investment

222、scheme,they should be regulated under the relevant regulatory framework as applicable to that product.4.42 The government recognises the feedback regarding the speed of development in this space and will continue to monitor the development of the market for these tokens.Activities relating to so-cal

223、led algorithmic or crypto-backed stablecoins 4.43 As with asset-referenced tokens,the government intends to regulate these products along the lines set out in the Consultation,as well as under the financial promotions regime.In general,this means so-called algorithmic or crypto-backed stablecoins wi

224、ll be regulated under the wider framework for unbacked cryptoassets.They will not fall within the scope of the forthcoming regulatory regime for fiat-backed stablecoins as they are not backed by fiat currency.4.44 This approach should not be taken to imply that so-called algorithmic or crypto-backed

225、 stablecoins behave in exactly the same ways as unbacked cryptoassets,but rather the broader framework the government intends to put in place for unbacked cryptoassets has the flexibility to accommodate all these varieties of token.36 4.45 As with asset-referenced tokens,this category currently repr

226、esents a small percentage of the market in terms of value and trading volumes,but the government will continue to monitor this situation.Activities relating to NFTs and utility tokens 4.46 Generally,the governments view is that NFTs of themselves are more akin to(for instance)digital collectibles or

227、 artwork than a financial services product.So,in the same way the sale of art is not regulated as a financial services activity,the government considers that in general activities in connection with NFTs are not appropriate for regulation as a financial service.That said,the government acknowledges

228、that a range of tokens currently on the market are described as NFTs but perform other functions,and it is possible this may become more common in future.As such,when assessing whether a NFT falls within the future financial services regulatory regime,the governments focus will be on whether the tok

229、en is used for one of the regulated activities in Table 4A of the Consultation within financial services markets or as a financial services instrument(in the general sense)or product,rather than how it describes itself.4.47 By way of example,an in-game purchase(such as an object that can be used or

230、displayed in-game)could be structured as an NFT.It is possible that this NFT might fall within the definition of a cryptoasset(either as defined in FSMA 2023 or in future,as more narrowly defined in secondary legislation).The sale of that in-game purchase(either within a specific game or on a market

231、place external to the game)would not necessarily be subject to the financial services regulatory regime for dealing in cryptoassets,as the NFT is not being sold within financial services markets or as a financial services instrument(in the general sense)or product.Likewise,an exchange on which said

232、NFT is traded is unlikely to be subject to the admission and disclosure obligations that would apply to a regulated financial services exchange admitting exchange tokens,or the regime governing the operation of a cryptoasset trading venue.16 In this example,the closest real-world analogy might be to

233、 a collectible being sold on an auction site.4.48 Conversely,something marketed as an NFT could fall within the future financial services regime for cryptoassets if it was in practice used as an exchange token.For example,a large class of NFTs technically unique but largely indistinguishable from ea

234、ch another could be minted.If buyers purchased these as a financial services instrument(in the general sense)or product without having a preference of one NFT over another(for example,if there was little or no price differentiation between the different tokens),this could be considered an exchange t

235、oken for those purposes and exchanges trading in the token subject to the applicable financial services regulatory regime.The fact that a token is designed or marketed as an 16 Such an exchange could,of course,be subject to admission and disclosure obligations in respect of e.g.exchange tokens admit

236、ted to the platform.37 NFT will not necessarily preclude the application of financial services regulation.4.49 The government expects utility tokens to be subject to a similar assessment as NFTs.Utility tokens are designed to(for example)provide digital access to a specific service or application an

237、d use technology such as DLT to support the recording and storage of data.Notwithstanding the purpose for which they were originally designed,a utility token could potentially be traded on cryptoasset trading venues for investment purposes.When assessing whether a utility token falls within the scop

238、e of the future financial services regulatory regime,the governments focus will be on how the token is used,rather on than a hypothetical application of the technology.For example,if a token could be used to access storage,but is also used for one of the regulated activities in Table 4A of the Consu

239、ltation within financial services markets or as a financial services instrument(in the general sense)or product,it will likely be regarded as an exchange token for those purposes and the relevant activities subject to the appropriate provisions of the future regulatory regime.4.50 As is the case in

240、traditional finance,cryptoasset firms will need to consider the relevant regulatory regime applicable to products they offer when designing them and introducing them to the market.38 Chapter 5 Regulatory outcomes for cryptoasset issuance and disclosures Recap on original proposals from the Consultat

241、ion 5.1 The Consultation set out governments intention to establish an issuance and disclosures regime for cryptoassets grounded in the intended reform of the UK Prospectus Regime:the Public Offers and Admissions to Trading Regime(POATR)and tailored to the specific attributes of cryptoassets.Two reg

242、ulatory trigger points were proposed:(1)admitting(or seeking the admission of)a cryptoasset to a cryptoasset trading venue,and(2)making a public offer of cryptoassets(including initial coin offerings(ICOs).For admission of cryptoassets to a UK cryptoasset trading venue,the government proposed to ada

243、pt the MTF model from the POATR.Under this framework,venues would write detailed requirements for disclosure documents required for admission,in accordance with principles established in the FCAs rulebook.For public offers,the current Prospectus Regime applies to offers of cryptoassets where those c

244、ryptoassets fall within the definition of securities in scope of the regime.This will continue to be the case under the new POATR,once implemented.For public offers of other cryptoassets the government is considering an alternative route(e.g.using the DAR).All admission and disclosure documents woul

245、d be stored on the National Storage Mechanism(NSM)maintained by the FCA.Venues would be required to search the NSM before new admissions and ensure information is consistent with other documents lodged.5.2 HM Treasury received 54 responses to this question.94%of those responses agreed or generally a

246、greed with the proposed regulatory trigger points,with 4%disagreeing and 2%of responses being neutral or mixed.Amongst those who fully supported the proposal it was Question 14 Do you agree with the proposed regulatory trigger points admission(or seeking admission)of a cryptoasset to a UK cryptoasse

247、t trading venue or making a public offer of cryptoassets?39 argued that this should help bring about an appropriate level of due diligence as well as increased transparency and trust to tokens that are made available to the UK public.Others noted that the proposed trigger points would also provide r

248、oom for innovation given that they would not apply to newly minted tokens which are not yet made available to the general public.Many responses also felt that the alignment to the issuance regime for transferable securities was logical.5.3 Of those who were generally in favour of the proposals,many

249、requested further clarity on the definition of issuance,offers and other key terms and concepts.At least five responses called for exemptions or transitional arrangements17 for cryptoassets already in circulation(especially those that are relatively well-established)arguing that these tokens benefit

250、 from increased transparency and trust given their trading history.Some responses suggested that the government should clarify the treatment of launchpads,airdrops and decentralised exchanges,18 while others sought greater clarity on issuance obligations for specific token types e.g.NFTs,fan tokens,

251、governance tokens and other types of utility tokens.19 Some industry associations recommended that currently regulated UK platforms(including currently designated MTFs and OTFs)in addition to future authorised cryptoasset trading platforms-should be able to undertake primary issuance activities of c

252、ryptoassets.Finally,a number of responses cautioned against a lift and drop approach based too heavily on the framework for transferable securities.5.4 A small number of responses disagreed with the proposed trigger points.At least one of these disagreed with the extra territorial scope,arguing that

253、 overseas firms making offers of tokens which may be available to UK customers should not be caught as long as those firms are not directly marketing to UK customers.5.5 Treasury received 54 responses to this question.72%of those responses agreed or generally agreed with the proposal but a significa

254、nt minority(26%)disagreed.Those that fully supported the proposal generally felt that centralised venues were the most appropriate market participants to take on oversight and responsibility for setting content requirements given their central role within the 17 Sometimes referred to as“grandfatheri

255、ng”in the feedback received 18 Readers should refer to Chapter 11(on Decentralised Finance)for further clarity on this 19 Readers should refer to Chapter 4(on activities relating to NFTs and utility tokens)for further information Question 15 Do you agree with the proposal for trading venues to be re

256、sponsible for defining the detailed content requirements for admission and disclosure documents,as well as performing due diligence on the entity admitting the cryptoasset?If not,then what alternative would you suggest?40 ecosystem,and the fact that information provided by venues is often the primar

257、y source of information for investors.Some responses pointed out that the governments proposal was preferable to an alternative model whereby a regulator determines a list of approved or accepted cryptoassets as is the case in some jurisdictions since such a model would not be sufficiently scalable

258、or dynamic and would put an excessive burden on the regulator.5.6 Amongst those who generally supported the proposal,the most commonly mentioned caveat was the potential for lack of consistency.The concern here was that giving responsibility for admission requirements to trading venues could lead to

259、 inconsistent and heterogenous disclosure documents,raising costs for the industry and making disclosure documents harder to navigate and interpret for investors.Related to this,some responses warned of venue acceptance arbitrage risks arising from different disclosure standards,a potential race to

260、the bottom,and concentration risks driven by the ability of the largest venues to outcompete smaller players.At least 10 responses suggested that the FCA should play a more prominent role in defining detailed content requirements for example by developing a template,or through establishing or endors

261、ing some sort of central body to do so.One response also highlighted potential conflicts of interest for trading venues admitting self-issued tokens.Some responses called for further clarity on certain aspects of the proposals e.g.ongoing disclosure requirements,the obligation for venues to investig

262、ate the potential for investor detriment,how requirements would apply to venues only catering only for wholesale or sophisticated investors,and the application of requirements for tokens distributed via decentralised networks.5.7 26%of responses disagreed with the governments proposal.This included

263、those that disagreed with the overall premise of regulating cryptoassets as financial services,as well as those who felt that the proposals put excessive burdens on firms.Within the latter population,some responses felt that the proposals went beyond the EUs equivalent framework(MiCA)in particular d

264、ue to the potential disclosure responsibilities on venues admitting assets with no identifiable issuer.Some felt very strongly that the FCA(or even HM Treasury)should play this role instead of cryptoasset trading venues.One respondent suggested that the regulator should instead oversee a register of

265、 approvers to enable other market participants not just cryptoasset trading venues to approve disclosure documents.5.8 47 responses were received to this question.64%of responses agreed or generally agreed with the proposed options but a significant minority(34%)objected to the approach on liability

266、.Those in favour of Question 16 Do you agree with the options HM Treasury is considering for liability of admission disclosure documents?41 the proposals felt that some form of liability would be necessary to make the disclosures regime meaningful and effective.It was also pointed out that the propo

267、sed approach would align to the disclosures regime for transferable securities.5.9 Some respondents were generally supportive of the approach towards liability but pointed out that costs arising from the use of law firms and other third parties could be transferred to investors.Others cautioned that

268、 the approach could favour more established cryptoassets and called for early-stage exemptions or minimum thresholds to help foster innovation in newer tokens.On a related note,some responses warned that prudential requirements could favour larger,more established exchanges and issuers.5.10 Several

269、responses argued that preparers of disclosure/admission documents should be permitted to use public information sources and provide information on a reasonable endeavours basis especially for more decentralised tokens.A number of cryptoasset exchanges pointed out that they would be extremely relucta

270、nt to take on liability for information that relates to the underlying token and network/protocol which is fully outside of their control(for example information concerning the token supply schedule,the vesting schedule,and the operation of the underlying consensus mechanism).Their view was the auth

271、orities should therefore consider the degrees of separation between the information and the organisation which produces the admission disclosure document.5.11 Responses which disagreed with the governments proposed approach generally took stronger positions on the arguments outlined above.Several st

272、rongly objected to the suggestion that venues should take any form of liability for tokens they admit for trading where there is no clearly identifiable issuer.Some warned of the potential for a major chilling effect,limiting the availability of tokens and the depth of information in disclosure docu

273、ments.A few responses suggested that the current proposals would push venues to locate elsewhere.5.12 HM Treasury received 53 responses to this question,with 92%agreeing or generally agreeing and 6%disagreeing.Most respondents felt that this was a sensible basis or starting point-though there were v

274、arious suggestions to include additional information including:Further information relating to the issuer or person controlling the project e.g.relevant financial information,their location/domicile,previous cryptoasset products and services and ICOs Question 17 Do you agree with the proposed necess

275、ary information test for cryptoasset admission disclosure documents?42 Information relating to the token economics e.g.token supply,distribution,inflation,reward mechanism Information relating to the tokens governance e.g.distribution of voting rights,governance processes for code changes,use of tim

276、e locks,review periods Information around potential conflicts of interest as well as available redress mechanisms or compensation arrangements(or lack thereof)5.13 Extensive feedback was received on the proposals to include risk information.Many responses pointed out that risk information should be

277、focused,specific and useful and that care should be taken to avoid a framework which results in forward-looking risk disclosures which are excessively long,unhelpfully exhaustive about every conceivable risk type,generic,and unlikely to be read by the typical investor.Others pointed out that risks a

278、re difficult to measure objectively for unbacked cryptoassets.5.14 In terms of style,many responses suggested that disclosures should be required to be made in simple,understandable language and should feature standardised,easily comparable information.A few respondents recommended that the necessar

279、y information test is kept flexible and not overly prescriptive.However,others noted that accompanying guidance would be helpful or necessary to assist firms in meeting the necessary information test.5.15 HM Treasury received 39 responses to this question,with 90%agreeing or generally agreeing and 8

280、%disagreeing.Many responses again recommended caution in mirroring the POATR too closely,without sufficient regard to the specific risks and characteristics of cryptoasset markets.Another common theme was proportionality and international competitiveness,with many stressing the need to avoid excessi

281、ve barriers to entry,such that innovation from smaller players can be encouraged and accommodated.Government response Disclosure requirements for well-established tokens and tokens without identifiable issuers 5.16 In general,the government intends to take forward the proposed approach,including the

282、 basis for the regime and trigger points.The governments view is there should be disclosure documents in place for all cryptoassets which are made available for trading on a UK Question 18 Do you consider that the intended reform of the Prospectus Regime in the Public Offers and Admission to Trading

283、 Regime(POATR)would be sufficient and capable of accommodating public offers of cryptoassets?43 cryptoasset trading venue.This would include all well-established tokens(i.e.those characterised by relatively high levels of liquidity and at least several years of trading history)as well as those which

284、 do not have a clearly identifiable issuer-e.g.Bitcoin.The key purpose of this regime is to make available consistent,minimum standards of information to consumers for all tokens used for activities within the regulatory perimeter.From this perspective it does not make sense to have a two-tier regim

285、e which differentiates between well-established tokens and more recently launched tokens.Indeed,these well-established tokens are likely to continue to be the most important tokens in terms of market share and consumer exposure for the foreseeable future,making them even more important from a consum

286、er information perspective.5.17 To reduce the risks and impacts of cliff edges and avoidable removals from trading20 relating to the back book of tokens already in circulation,there will need to be sufficient transitional arrangements for bringing activities into the regulatory regime i.e.sufficient

287、 time periods between laying the legislation and the regulatory regime becoming effective.5.18 In addition,the government agrees that those preparing documents could make use of publicly available information when preparing relevant sections of their disclosure/admission documents,but they would nee

288、d to be clear where this information originated and the level of due diligence they had done over it.This would be consistent with the approach under the UKs POATR.Venues could also work together to jointly gather disclosure information,make use of third parties,or distribute the administrative burd

289、en in other ways that are mutually agreeable.5.19 The government agrees with responses which suggested that some degree of token withdrawals from platforms may be beneficial through identifying and removing cryptoassets which no party is willing to stand behind(or where the necessary information sim

290、ply cannot be reliably gathered and assessed)from the public sphere.This could increase trust and confidence levels in the remaining population of tokens which are publicly accessible.5.20 For cryptoassets which are issued after the regime becomes effective,the governments position based on the curr

291、ent and historical situation is that the quantum or flow of these newly issued tokens which do not have an identifiable issuer is likely to be limited.It is a proportionate requirement for cryptoasset trading venues which are seeking admission of such assets for commercial purposes to prepare disclo

292、sure documents for these tokens.Given that most major 20 Historical examples show that the admission of a token to a venue(especially a relatively illiquid token to a major cryptoasset exchange)can have a significant effect on the market valuation of the cryptoasset driven by perception of greater t

293、rust,credibility and the anticipation of increased adoption and demand.Conversely,a removal from trading could significantly undermine the market capitalisation of a cryptoasset,thereby impacting the cryptoasset portfolios of individual investors.44 crypto exchanges already have extensive coin admis

294、sion policies it is anticipated that this should not be a major lift beyond existing policies and procedures.Responsibilities for defining detailed content requirements 5.21 The government also intends to take forward the proposal for venues to define detailed content requirements for admission disc

295、losure documents.However,the government acknowledges the appetite from industry for more prescriptive rules on content requirements;the government is supportive in principle of the idea of a centralised coordinating body(e.g.industry association)to coordinate this effort with FCA oversight.This shou

296、ld help address concerns raised about heterogeneity or inconsistency of disclosures.Wholesale versus retail 5.22 The government notes the call for clearer differentiation between venues which cater to retail consumers versus those which only admit institutional investors.While these sorts of details

297、 would typically be covered in firm-facing rules defined by the FCA,the government agrees,in principle,with the idea that disclosure requirements would differ and be less prescriptive for venues which only admit institutional investors(on the basis of“same risk,same regulatory outcome”).The benefit

298、of allowing trading venues to define the detailed content requirements for admission and disclosure documents is that this kind of differentiation would be within their remit,and as much or as little differentiation as needed would be possible.Public offers(including ICOs),airdrops and tokens earned

299、 via reward mechanisms 5.23 For tokens made available through a public offer(e.g.ICO or other similar issuances)rather than admitted to trading via a regulated platform,disclosure requirements and exemptions will likely be similar to those proposed in the new draft POATR.21 Such exemptions would the

300、refore be expected to include offers of free cryptoassets(e.g.via an airdrop or similar distribution mechanism)or offers made only to professional/sophisticated investors.Value thresholds may need to be calibrated differently due to the typical size of an ICO and specific risks.5.24 For tokens earne

301、d via a reward mechanism,this is unlikely to constitute a public offer as these tokens would be awarded in return for a service(staking and validation,mining,or providing liquidity in cryptoassets to receive new tokens in the case of liquidity mining).The government will keep this matter under revie

302、w since it is important that any such determination is not used to game the system to avoid appropriate disclosure obligations.21 https:/www.gov.uk/government/publications/public-offers-and-admissions-to-trading-regulations-2023-draft-si-and-policy-note 45 5.25 Notwithstanding the above,firms will s

303、till need to consider obligations around cryptoasset financial promotions for tokens which are exempted from,or out of scope of,the cryptoasset issuance regime.Liability arrangements(including for tokens without identifiable issuers)5.26 Regarding liability,the government maintains the position that

304、 all firms required to publish cryptoasset disclosure documents should be liable for their accuracy.However,the government agrees that cryptoasset exchanges which choose to take responsibility for the disclosure documents-should not be held liable for all types of consumer losses arising from events

305、 relating to that token,provided that they have taken reasonable care to identify and describe the risks.For example,where a loss is caused by a failure of the underlying protocol or network that is not controlled or operated by the trading venue,this would be unlikely to constitute a liability even

306、t providing,for example,that the trading venue had(i)performed a reasonable degree of due diligence on the token and the underlying network,(ii)made very clear to consumers their findings and(iii)avoided misleading statements guaranteeing the performance and resilience of the network.5.27 This is si

307、milar to the envisaged approach to liability under the POATR,for statements believed to be true based on reasonable enquiries.In contrast,under a strict liability regime as proposed in some other jurisdictions-reasonable steps may not be a defence.Trading venues can therefore manage their liability

308、if they make reasonable enquiries in preparing disclosure documents(which would be within their control).5.28 In addition,certain types of protected forward looking statements(e.g.relating to the project,and future use cases of the token)should be held to a different liability standard than historic

309、al,factual statements(e.g.relating to code audits which have been conducted in the past and vulnerabilities which have been identified through these).The former would generally be subject to recklessness/dishonesty standards22 whilst the latter would be subject to negligence standards.23 This is con

310、sistent with the proposed approach underpinning the POATR and should encourage issuers to include helpful and relevant forward-looking information to the market,without undue fear of a deluge of liability claims.This is a more flexible and proportionate approach than a regime with strict liability s

311、tandards and should mitigate the“chilling effect”that some responses warned of.Necessary information test 5.29 Regarding the proposed high-level necessary information test,the government intends to use this as a starting point but will consider 22 See s 90A and Schedule 10A of FSMA.23 See s 90 and S

312、chedule 10 of FSMA.46 suggestions for additional categories of information.A necessary information test will ensure that an overall standard of preparation for disclosure/admission documents remains in statute whilst providing flexibility.However,the government expects that many of the more specific

313、 categories of information suggested by respondents would,in practice,be captured by the test.For example,it would be difficult to demonstrate that the necessary information test would be met if information about conflicts of interest and the availability(or not)of redress mechanisms was absent.The

314、government agrees with the suggestions for HM Treasury,the FCA,industry and other stakeholders to work together to further shape disclosure requirements and the associated necessary information test.Some of this external engagement has already commenced for example through roundtables with industry

315、participants.Mitigating barriers to entry 5.30 Several respondents noted that onerous disclosure/admission requirements can act as a barrier to entry,deterring participation from SMEs and stifling innovation.The government is cognisant of this and therefore views the following features of the propos

316、ed regime as important:Disclosure/admission requirements will apply only to tokens that are made available to the UK public(i.e.not to all newly created tokens)Certain exceptions will apply for example offers made for no consideration or where the value of consideration is below a certain threshold,

317、offers made to a limited number of persons or only to professional investors,and tokens acquired solely through a consensus protocol reward mechanism Disclosure/admission documents will need to be focused and fit-for-purpose and would likely not take the same shape or form as long equity prospectus-

318、like documents For any prudential requirements on issuers,professional indemnity arrangements-as an alternative to own financial resources-will be considered subject to regulator rules 47 Chapter 6 Regulatory outcomes for operating a cryptoasset trading venue Recap on original proposals from the Con

319、sultation 6.1 The Consultation set out governments proposals to establish a regulatory framework for persons operating a cryptoasset trading venue which would be based on existing RAO activities of regulated trading venues including the operation of an MTF.Accordingly,persons carrying out these acti

320、vities would be subject to prudential rules and various other requirements including consumer protection,operational resilience,and data reporting.6.2 HM Treasury received 48 responses to this question,with 85%agreeing or generally agreeing and 8%disagreeing.A large number of responses suggested tha

321、t the existing Markets in Financial Instruments Directive(MiFID)and FSMA frameworks were largely adequate or at least served as a good starting point.Many also noted that the proposed approach would bring beneficial consistency and familiarity and could encourage firms that operate already-regulated

322、 platforms to participate in the cryptoasset sector.6.3 Of those who generally agreed with the approach,a common theme of concern was proportionality and international competitiveness.In particular,many responses warned that excessively stringent prudential requirements and onerous reporting require

323、ments could result in crypto trading venues choosing to locate elsewhere.Several responses pointed out differences between cryptoasset trading venues(as they typically operate today)and MTFs which would need to be carefully considered.Specifically,the current prevalence of matched principal executio

324、n protocols in crypto trading venues arguably makes them more akin to OTFs rather than MTFs.In addition,most crypto Question 19 Do you agree with the proposal to use existing RAO activities covering the operation of trading venues(including the operation of an MTF)as a basis for the cryptoasset trad

325、ing venue regime?48 trading venues permit direct retail access,whereas MTFs admit only institutional investors.One response also highlighted that,unlike crypto trading venues,MTFs do not take custody of participant funds,issue their own securities,extend credit to members,or act(in effect)as a centr

326、al clearing counterparty.6.4 Amongst those that disagreed,there were some suggestions to use different existing regimes as a basis for example regulations for Recognised Investment Exchanges(RIEs),the regulated activity of arranging deals or that of operating a peer-to-peer lending platform.Some fel

327、t that the proposed approach would push cryptoasset matching activity to other jurisdictions(or decentralised protocols),especially if similar prudential and data reporting requirements were adopted,together with the obligation to subsidiarise in the UK.6.5 The government received 59 responses to th

328、is question.Again,a common theme in the feedback was international competitiveness and avoiding excessive barriers to entry for example,by permitting firms to make use of professional indemnity insurance arrangements as an alternative to own funds in order to meet prudential requirements.6.6 The pro

329、posals on data reporting also generated significant feedback with some arguing that order book reporting requirements would be disproportionate since they would require the sharing of sensitive and proprietary information.Some responses suggested that order book reporting should be limited to off-ch

330、ain transactions only,or that reporting requirements should be introduced when the industry has matured further.However,others argued that the authorities should go further suggesting,for example,that real time reporting should be required.6.7 Another area where many responses suggested that the req

331、uirements should go further was operational resilience,with recommendations relating to contingency planning,testing,third party audits,proof of solvency,proof of reserves and proof of liability.Various responses highlighted the need to address risks including supplier failure,service deterioration,

332、concentration risk,political risks and transfer of ownership through appropriate business continuity and recovery and resolution plans.6.8 Proposed location requirements were a contentious theme.Many were in support of the indication that firms operating cryptoasset trading venues would likely requi

333、re subsidiarisation in the UK.But there were also strong objections to this on the basis that it would increase costs and regulatory burdens and fragment liquidity pools.Some also argued that this position would represent a departure from similar Question 20 Do you have views on the key elements of the proposed cryptoassets trading regime including prudential,conduct,operational resilience,and rep