UK Includes Crypto Assets in Financial Services Reform Package
Rishi Sunak’s government is pushing forward with plans to turn the United Kingdom into a global hub for crypto assets.
The UK government today announced a package of more than 30 reforms to financial regulation, including the extension of tax breaks for investment managers to cover crypto assets.
Dubbed the “Edinburgh Reforms,” the measures are designed to replace EU regulation covering areas such as disclosure for financial products and include relaxing ring-fencing capital rules to lighten the burden on smaller banks.
The announced measures include publishing a formal response to the consultation on expanding the Investment Manager Exemption to cover crypto assets, which will facilitate their inclusion in the portfolios of overseas funds managed in Great Britain without creating a risk of UK taxation.
Rishi Sunak’s government plans to implement this change through HM Revenue & Customs regulations before the end of the year, said Chancellor of the Exchequer Jeremy Hunt.
Other measures announced by the Treasury include setting up a financial market infrastructure sandbox next year, which will enable firms to test and adopt new technology and innovations, such as distributed ledger technology.
According to Hunt, financial services is one of the five growth sectors for which the government will prioritize the review of EU laws, with reforms taking forward the government’s vision for a “globally competitive” and technologically advanced financial services sector that “acts in the interests of communities and citizens.”
“Our regulatory framework for financial services must support innovation and leadership in emerging areas of finance,” Chancellor Jeremy Hunt said in a statement, adding that these reforms will create jobs, support businesses, and power growth across all four nations of the UK.
Digital pound consultations
In the coming weeks, the UK government will also bring forward a consultation on the case for a central bank digital currency (CBDC), with the Bank of England releasing a paper that will set out technology considerations informing the potential build of a digital pound.
A CBDC is a digital version of a state’s fiat currency—like the U.S. dollar or the euro—backed by a central bank.
Sunak, who previously worked as a hedge fund manager at the investment bank Goldman Sachs and replaced Liz Truss as the Prime Minister in October, showed enthusiasm over the possibility of issuing a digital pound last year, saying the move could “offer businesses and consumers new ways to pay.”
In April this year, Sunak, then the UK’s Chancellor of the Exchequer, outlined his ambition to make the UK “a global hub for crypto asset technology,” with some proposed measures including stablecoins being “brought within regulation” so as to have them used as a recognized form of payment.
Those plans took another step forward today as the government said the Financial Services and Markets (FSM) Bill will establish a safe regulatory environment for stablecoins and “ensure the government has the necessary powers to bring a broader range of investment-related cryptoasset activities into UK regulation.”