Crypto regulations vary worldwide, with some countries embracing it and others banning crypto outright. The United Kingdom (UK) government has made important progress in developing the UK crypto regulations to support cryptocurrency in the UK and position itself as a leading crypto economy. In a recent Chainalysis study, the UK emerged as the most prominent crypto economy in the Central, Northern, and Western Europe (CNWE) region.
Starting with one recent UK crypto regulation 2023, the Economic Crime and Corporate Transparency Bill, we’ll be exploring more crypto laws in the UK in this article.
What is the Economic Crime and Corporate Transparency Bill?
The UK Economic Crime and Corporate Transparency Bill is one of the latest UK crypto regulations to have received royal assent from the monarch on October 26, 2023. It is aimed at tackling fraud and money laundering crimes in the UK. The Bill expands the definition of “economic crime” to include crimes committed using cryptocurrency in the UK. It gives law enforcement agencies the power to seize and recover cryptocurrency in the UK associated with illicit activity.
The UK crypto regulations introduced through the Economic Crime and Corporate Transparency Bill align well with the government’s plans to regulate cryptocurrency in the UK.
Let’s get a little technical here on what the bill does:
- The Bill includes reforms to Companies House, limited partnerships, and information sharing. It also introduces a new corporate criminal offence of “failure to prevent fraud” and reforms the identification principle for corporate liability.
- The Bill turns the role of Companies House from a passive recipient of information to a much more active gatekeeper. Under the new Companies Act provisions of the Economic Crime and Corporate Transparency bill, the Companies House is given the power to query any filings, request further evidence, reject any filings, and remove material from the register more swiftly.
- The Bill contains provisions introducing registration and transparency requirements for limited partnerships. The changes aim to strengthen the legal framework and limit the risk of limited partnerships being used for illegal activities.
- The newly introduced ‘failure to prevent fraud offences’ clause applies to large organisations that do not have reasonable fraud prevention measures. The offence applies throughout the UK. If an employee commits fraud offences or targets victims in the UK, an organisation could still be held accountable even if it is based overseas. The offence has a penalty of unlimited fine.
- The new law also reforms the identification principle for attributing liability to corporations. Under the new rules, if a “senior manager” of a corporation commits a relevant economic crime, the corporation can be held guilty of the offence.
- One of the Economic Crime and Corporate Transparency Bill provisions permits the recovery of cryptocurrency in the UK used for crimes without conviction. The new crypto law also aims to combat the use of digital assets for terrorism or related reasons.
Following the introduction of the bill, crypto-centred and other organisations operating in the UK should start planning for the upcoming changes, such as identifying who would be considered senior managers under the new corporate liability rules, assessing the fraud risks their business may face, and reviewing the existing fraud prevention measures to ensure they align with the new requirements. They must also determine if any modifications are needed to incorporate these measures into their reasonable prevention procedures.
Timeline of the Bill
The UK Economic Crime and Corporate Transparency Bill was introduced by the UK government in September 2022 to crack down on money laundering and fraud, by expanding the government’s ability to target cryptocurrency in the UK used for illicit purposes.
The Economic Crime and Corporate Transparency Bill went through several stages after its introduction before receiving the royal assent, as can be seen below:
Source | Passage of the Economic Crime and Corporate Transparency Bill
The Bill started from the House of Commons and went through the reading, committee, and report stages. It then moved to the House of Lords, where it underwent the same three stages. The final stage involved the consideration of the amendments made to the bill. All this ultimately led to it receiving royal assent and becoming a new UK crypto regulation 2023.
What we saw of UK crypto regulation 2023
The UK Economic Crime and Corporate Transparency Bill is just one of the many UK crypto regulations of 2023. In June 2023, the Financial Services and Markets Act 2023 received royal assent, making trading cryptocurrency in the UK a regulated financial activity.
The crypto UK Travel rule also came into effect in September 2023. The UK Financial Conduct Authority introduced this crypto law. The crypto law requires Virtual Asset Service Providers (VASPs) to collect, verify and share transfer-related information about cryptocurrency in the UK. The crypto law attempts to enforce Anti-Money Laundering and Counter-Terrorist Financing rules on activities carried out on-chain.
The UK Government also published a document in October 2023, announcing updates on their plans to regulate fiat-backed stablecoins. According to the document, His Majesty’s Treasury plans to introduce specific legislation to the parliament in 2024, bringing the regulation of fiat-backed stablecoins under the Financial Conduct Authority’s (FCA) mandate.
At the end of October 2023, the UK government also confirmed plans to regulate the country’s crypto industry, announcing through their consultation paper formal legislation for crypto related activities by 2024. The paper further elaborated that a number of crypto activities will be brought under the same regulatory measures for banks and other traditional financial services. The government’s proposals included some stricter rules for crypto exchanges to ensure user safety, custodians to store crypto on behalf of users, crypto lending entities, and robust regimes for market abuse and crypto issuance and disclosure.
Moreover, the UK government plans to continue collaborating with financial services and technology industries to bring in legislation for digital industries, with the end goal to become a crypto hub. A digital securities sandbox (DSS) is part of this initiative, which would let companies test their products with real-time customer feedback. The sandbox would be overseen by the FCA (Financial Conduct Authority) and the Bank of England. The assets to be included in the sandbox include debt, equity, and money-market instruments; however, tax treatment within the DSS is yet to be clarified.
UK crypto regulations shaping the crypto landscape!
UK Crypto Regulation 2024
The UK crypto regulations, though stringent, are practical and balanced. The government does pay attention to protecting consumers and ensuring the financial system’s integrity while recognising the potential of crypto in boosting innovation and economic growth for the country.
In other words, the UK is well-positioned to be a leader in crypto regulations. In fact, its approach could be a model for other countries in developing their crypto laws. With so many UK crypto regulations having come into play in 2023, it will be interesting to see how UK crypto develops in the coming years.
For a quick overview, in UK crypto regulation 2024, Rishi Sunak’s government plans to bring further clarity for crypto firms in the UK. The phased plan to bring crypto issuers, exchanges, and other relevant service providers under the same regulations governing banks will be set into motion. Further, the aforementioned digital sandbox will provide new insights for handling digital securities.
For more of the latest news and updates on crypto, stay tuned to Coinbrit!