The deadline has come for comments and consultation papers and a call for evidence issued by the UK Treasury on the regulatory framework for crypto assets. This long-awaited document, which was released in February, received a full response from various players in the cryptocurrency industry.
Blockchain providers Polygon Labs, venture capitalists Andreessen Horowitz (a16z), the Association of Financial Markets in Europe (AFME), and the Digital Pound Foundation (DPF) published their response on May 1 to the call for comments.
Among these different voices, some common issues were raised. The Treasury’s call for “one risk, one regulatory result” is well received, although there is no one understanding of what this entails, besides its basis in the Financial Services and Markets Act of 2000. US Securities and Exchange Commission based on this. Howey tested the company’s UK plans. In response, a16z wrote:
“It is encouraging that the Treasury’s interpretation of this principle recognizes that it does not mean that it will be appropriate to apply exactly the same set of rules in all cases to achieve the same regulatory result.”
This is linked to the fact that the strategy focuses on the organization of events, rather than the assets themselves. The conflict between centralized finance (CeFi) and decentralized finance (DeFi) is at the heart of this issue. Polygon wrote:
“The sources of risk in DeFi systems are different from those in centralized systems, such as CeFi or traditional financial systems. To this end, it may be right to update: ‘Same risk, same result’ process’ to ‘different ways of risk, same control results.'”
The proposed system treats fiat-backed stablecoins and algorithmic stablecoins separately, classifying algorithmic stablecoins as “non-backed cryptoassets.” Polygon supports a role-based system in this regard. AFME, which works with the Clifford Chance consultancy in its response, highlighted the importance of a global taxonomy of crypto assets for effective international law and “one event” to remove the representation of value based on blockchain as loyalty and reward.
AFME has also identified a regional area of proposed crypto legislation, which is being drafted to target businesses that provide services to UK citizens. This is a broader opportunity than traditional wealth law, he said.
DPF understands that it is possible with “one risk, one legal system” principle and treatment of many types of crypto assets, and talks about them in detail. The structure of stablecoins is one of the main points that he thinks needs to be clarified in this regard.
The UK government will respond to the feedback it received on its paper and engage in further research on specific legislation as part of its next steps, if they are “forced”.
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