New UK Law Recognizes Crypto Trading as Regulated Financial Activity

The United Kingdom has officially passed the Financial Services and Markets Act 2023, a reform bill, which received Royal Assent from King Charles on Thursday, as announced by the UK government in a press release. As per the new law, cryptocurrency trading is now considered a regulated financial activity. The revised act defines crypto assets as "cryptographically secured digital representation of value or contractual rights" and categorises them as regulated financial instruments, products, or investments.

Royal Assent is a procedural stage that follows the agreement of lawmakers on a bill, transforming it into an Act of Parliament. The bill had already received approval from the upper house of Parliament on June 19 before reaching this stage.

The UK Treasury emphasises that the objective of this law is to regulate crypto assets and ensure their secure adoption within the country. The government views this legislation as a significant stride forward for the economy and describes it as a "rocket boost."

Economic Secretary to the Treasury Andrew Griffith commented, "This landmark legislation grants us control over our financial services rulebook, supporting UK businesses and consumers, and driving growth. By repealing outdated EU laws from Brussels, it will unlock billions in investment, enabling innovation and economic expansion."

In addition to regulating crypto assets, the Financial Services and Markets Act 2023 also lays the foundation for the progress of the blockchain sector. It establishes "sandboxes," controlled environments that facilitate the testing and adoption of new technologies, including blockchain, within financial markets.

Jeff Feng, co-founder of blockchain development company Sei Labs, views the formal recognition of cryptocurrencies in the UK as a significant advancement for the wider crypto industry. He sees it as an acknowledgment of the increasing legitimacy of digital assets, which is crucial as countries globally compete for supremacy in the crypto and tech space. Feng further praises the UK's decisive regulatory approach to crypto and its potential to attract global tech talent, positioning the country to compete with other crypto-friendly nations.

The Financial Services and Markets Act 2023 will also enable the implementation of the Edinburgh Reforms, which comprise over 30 regulatory changes to the financial sector. These reforms include extending tax breaks for investment managers to cover crypto assets.

In April 2022, the UK Prime Minister Rishi Sunak expressed his ambition to make the UK a global hub for crypto asset technology. He proposed measures that encompass bringing stablecoins under regulation to establish them as recognized forms of payment.

Apart from regulating crypto assets, the bill includes provisions for heightened scrutiny of financial services regulators, ensuring clear accountability, appropriate democratic input, and transparent oversight. The legislation also aims to protect access to cash.