UK Government Set to Regulate Crypto Market to Protect Consumers

JM — Thu, 15 Jun 2023 06:14:15 +0000

New Regulation for Crypto Market

The UK government has announced plans to regulate the crypto market as part of a bid to protect consumers following the FTX scandal. Stricter rules will be implemented for crypto trading platforms and lending, focusing on the activity, rather than assets themselves. The regulation comes after a record £1.6 billion worth of cryptocurrency was stolen in hacks of services in the year to July 2022 as online criminals and nefarious state actors exploit vulnerabilities in decentralised finance. Andrew Griffith, Economic Secretary to the Treasury, said, ‘We must also protect consumers who are embracing this new technology – ensuring robust, transparent, and fair standards.’

Risks Highlighted by FTX Scandal

The FTX scandal has raised important questions around conflicts of interest, market conduct, and operational resilience. Mitigating these risks will require a combination of robust prudential safeguards, operational risk controls, transparency, and data reporting arrangements, measures to manage conflicts of interest, good governance, and adequate record keeping. It is hoped that the new legislation will allow the benefits of crypto technology to be realised in a secure, fair, and transparent manner.

UK Investors Exposed to Scams and Exchange Collapses

At present, there is no real regulation of the crypto industry in the UK, leaving investors exposed to scams and exchange collapses. Crypto fraud is on the increase with assets stolen through hacks or scams. Additionally, the collapse of exchanges such as FTX, along with serious allegations of misappropriation of funds, corruption, and lack of corporate governance have led to investor confidence being at a low point. The crypto sector desperately needs good news, and the Treasury’s announcement today that plans to regulate a broad suite of cryptoasset activities, consistent with its approach to traditional finance, is a welcome statement.

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Crypto Lender Celsius Owes £4 Billion to Customers Following Bankruptcy Filing

JM — Mon, 12 Jun 2023 06:35:12 +0000

Celsius Network files for bankruptcy amid $4 billion user debt

UK-based Celsius Network, a crypto lending platform, has filed for bankruptcy and revealed that it owes £4bn to its users as a result of a $1.2 billion hole in its balance sheet. Celsius blamed rampant inflation, war in Ukraine, the collapse of several other crypto funds, and increased reluctance to do business with firms holding crypto assets. As a result, users began withdrawing their digital assets from Celsius’ platform at a rapid pace, leaving the company unable to meet its obligations. The bankruptcy filing comes after Voyager Digital and Three Arrows Capital also entered bankruptcy in the past three weeks.

Crypto business closures highlight losses and raise concerns

The company has promised to act quickly to generate ‘meaningful recoveries’ for stakeholders. Viktor Prokopenya, a London-based fintech investor, believes that central banks must act now to introduce the right regulation and support for crypto and ensure political stability before too much trust evaporates from the asset class.

Central banks urged to act to prevent wider asset class fallout

The news follows the growing trend of cryptocurrency firms entering bankruptcy in the past few weeks, with over $1tn wiped off the global crypto assets’ value in the past three months, as per CoinMarketCap data. Such an event could signal a 2008 style mortgage crisis or a 1930s ‘run on the bank’ if too many people try to cash in without the necessary collateral in place.

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