Overall, the crypto industry leaders well-received UK's crypto regulatory framework.
A consultation paper and call for evidence by the United Kingdom's HM Treasury, published in February, has finally reached its deadline for comments.
The proposal has drawn responses from a variety of cryptocurrency industry heavyweights, including Polygon Labs, Andreessen Horowitz (a16z), the Association for Financial Markets in Europe (AFME), and the Digital Pound Foundation (DPF).
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While the diverse voices shared their opinions on the proposal, they also raised some common concerns. One such issue was the Treasury's call for a "same risk, same regulatory outcome" approach, which lacked a clear consensus on what it entailed. Despite this, it was generally well-received as it was based on the Financial Services and Markets Act of 2000.
Highlighting the weaknesses in the United States Securities and Exchange Commission's (SEC's) reliance on the Howey test, California-based a16z stated in their response:
It is encouraging that the Treasury’s interpretation of this principle recognizes that it does not mean it will be appropriate to apply exactly the same form of regulation in all cases to achieve the same regulatory outcome.
Another crucial point of discussion was the focus on regulating activities rather than the assets themselves, with the key differences between centralized finance (CeFi) and decentralized finance (DeFi) taking center stage.
When talking about the matter, Polygon Labs suggested:
The source of risk in DeFi systems is significantly different than that in centralized systems, like CeFi or the traditional financial system. To this end, it may be more accurate to update: ‘same risk, same regulatory outcome’ to ‘different source of risk, same regulatory outcome.’
Polygon also favored the activity-based regulatory approach for differentiating between fiat-backed stablecoins and algorithmic stablecoins, which the proposal classified as an "unbacked cryptoasset."
The Digital Pound Foundation emphasized the need for clarification in several areas, particularly the classification of stablecoins, as it saw potential deviations from the "same risk, same regulatory outcome" principle.
The UK government will now review the collected responses and, if deemed necessary, engage in further consultations on specific rules before moving forward with the proposal.
The continued desire to receive comments on crypto-related matters shows UK's dedication to creating rules acceptable to both industry players and the authorities. On April 25th, FCA Executive Director Sarah Pritchard revealed that FCA is eager to collaborate with crypto companies to create the industry's regulatory framework.
