Welcome, and thank you for being part of the MyZucoins community! Dive into some important crypto, finance, and tech news to stay ahead.
UK Gov Says Firm “NO” to Crypto as Gambling
The UK’s HM Treasury has strongly disagreed with a proposal to categorize cryptocurrency trading as gambling. The recommendation for this change in law was put forward by a multi-party group of MPs in May 2023. They argued that cryptocurrencies have “no intrinsic value” and warned that treating them as financial assets could create a misleading “halo effect” for consumers, making crypto trading seem safer than it actually is.
However, the Treasury, led by Economic Secretary Andrew Griffith, responded on July 19 with objections. Griffith stated that such a regulation would be out of line with global norms, could push crypto activities to other jurisdictions, and wouldn’t adequately address certain risks, such as market manipulation or inadequate trading disclosures.
Instead, the government sees a financial services regulatory framework as a better approach for addressing the risks of cryptocurrencies and fostering safe innovation. The government’s official statement also highlighted recent strides made in crypto regulations, including laws against deceitful advertising and the ongoing process of turning the Financial Services and Markets Bill into law to regulate crypto and stablecoins. This bill is set to be in effect by late 2023.
Finally, the government’s report touched on the currently halted launch of the Royal Mint NFT, noting that while the launch remains on hold for now, the proposal is still under consideration. Read more here.
Crypto Firms Face Compliance Deadline in UK
The UK’s Financial Conduct Authority (FCA) has drawn a line in the sand for cryptocurrency companies: comply with financial promotion rules by October 8, 2023, or face potential criminal charges. The rules apply not only to firms operating within the UK but also those abroad if their marketing activities impact British customers. Financial promotion is defined broadly, encompassing everything from websites and social media posts to mobile apps and online advertisements.
Companies are required to apply for registration and pay a fee if approved. They also must clarify their planned response to the notice, with a deadline for reporting back by August 4. Four legal paths are laid out for communicating financial promotions, including Anti-Money Laundering and counter-terrorism financing (AML/KYC) procedures, and other critical information about fund transfers via cryptocurrency.
In early June, UK authorities initiated a consultation process to establish guidelines for “crypto asset” financial promotions. The consultation, which ends on August 10, aims to collect information from industry participants and assess the prerequisites for promotional activities.
The FCA has been active in shaping a comprehensive regulatory environment for cryptocurrency companies. Sarah Pritchard, the FCA’s Executive Director of Supervision, Policy, and Competition, warned earlier this year that the regulator would actively monitor compliance and take enforcement action where necessary. Read more here.
Zucoins Keeps an Eye on Crypto Regulations
Why pay attention to what is happening in the UK? Well, these sorts of regulations often tend to, over time, also find their way into many areas like the EU, Canada, US, Australia, Japan and New Zealand. As the UK is the first of these groups to embrace the crypto industry so extensively, they’ll get to set the initial tone for some of these rules, which oftentimes, lawmakers elsewhere will use as examples and case studies to build their own similar regulations.
The ongoing debates and decisions about cryptocurrency regulation, like the recent UK Treasury’s rejection of classifying crypto trading as gambling, offer valuable insights for emerging crypto products such as Zucoins and its SplitChain network. These insights can guide the development and strategies of these products to align with regulatory norms and user expectations—something Zucoins has been carefully navigating and working on for years.
One important lesson is about the value perception of cryptocurrencies. The argument that cryptocurrencies have “no intrinsic value” was a key factor in the original suggestion to classify them as gambling.
In contrast, Zucoins has been focusing on bringing value to its Splitchain protocol. This steers the system towards productivity and real value, away from pure speculation, which is a trait still plaguing most cryptos out there at the moment. This was covered in one of our past deep dives here.
Another takeaway is the growing expectation for appropriate regulatory frameworks from governments. One that allows innovation to continue in this still-forming industry, without destroying it. Fortunately, the UK Treasury sees their regulatory framework as more suitable for addressing crypto risks and encouraging safe innovation, instead of pushing the industry underground by banning it, which the IMF (essentially a major international bank), itself said is “not effective”, as we reported recently.
One point that needs to be underscored in the UK Treasury’s concerns is “inadequate trading disclosures”, highlighting the need for transparency. It’s similar to the SEC requirements in the recent US Bitcoin ETF filing, which is being handled by the popular Coinbase exchange.
The good part is, not only do Zucoins’ transactions occur peer-to-peer, but each caching node on the Splitchain network can opt-in to enable settings for extra compliance measures, as would be needed for certain financial on-off ramps, such as by exchanges or institutions. This flexibility allows businesses whose Splitchain nodes need regulatory compliance to operate within those rules.
In all, the journey of Zucoins and its SplitChain network is a dance with regulation, user expectations, and technological innovation. By learning from the experiences and insights of the wider crypto world, they are continuing to move towards a future where digital assets are widely accepted, valued, and regulated.
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All the best,
Peter & Rob
MyZucoins