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UK Financial Conduct Authority: We Will Not Regulate Bitcoin and Ether

The British Financial Conduct Authority (FCA) has confirmed that they will not be regulating cryptocurrencies such as Bitcoin and Ether as it falls out of their perimeter.

The FCA first issued a finalized policy statement on digital assets titled “PS19/22: Guidance on Cryptoassets”. This policy statement update is in response to the feedback received from the previous policy statement issued in January. The objective of the final guidance is to bring more clarity on the regulation for the existing types of digital assets.

Bitcoin and Ether, which are considered major cryptocurrencies, are classified as “exchange tokens.” These exchange tokens are not backed by any central authority and are usually decentralized and primarily used as a means of exchange. The FCA has stated that they will not be regulating exchange tokens. However, Anti-Money Laundering regulations still apply.

Security tokens and utility tokens have been classified to fall under the regulatory perimeter and may be regulated as stated by the FCA. Security tokens that have features that provide rights and obligations to specific investments such as shares or debt instruments. Utility tokens, on the other hand, maybe regulated if they meet the definition of electronic money or a security token.

It was suggested in the statement that market participants should use the guidance as to the first step in understanding how they should treat cryptocurrencies. However, definitive judgments can only be made on a case-by-case basis.

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Coinbase Partners with DustAid for Crypto Donations During Christmas

In a recent blog post, Coinbase announced its charitable endeavors to help DustAid by allowing its customers to donate Crypto to three other charities, during the Christmas period. DustAid is an organization that supports projects globally. The partnership will give way to Coinbase users within the UK to donate crypto to important causes promoted by organizations such as NSPCC, a British children’s charity that keeps young people away from abuse as well as the Little Edi Foundation, which supports and provides grants to rural communities in Romania, which are struggling, and Space for Giants, who endeavor to protect the future of elephants and their habitat.

Louise Corden, the Lead Digital Producer for NSPCC, adds, “Raising funds via cryptocurrency highlights how the NSPCC is continually exploring new ways to enable people to donate to the charity and contribute to our fight for every childhood. We are really grateful for the backing we have received from DustAid and Coinbase, and we now hope that users of cryptocurrency go to their platforms to make a festive donation to Childline.”

In addition, the managing director also believes in the meaningful impact blockchain technology can have on people, on a global scale. To quote, “DustAid’s mission is to make giving a simple, easy, and transparent part of our daily lives. We are really proud to be working with leading organizations like Coinbase and NSPCC to make this a reality and to help children be heard this Christmas.”

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British University Reveals Blockchain-Enabled Digital Certificate to Water Down COVID-19 Dangers Across Supply Chains

Birmingham City University (BCU) in the United Kingdom is testing the waters with a blockchain-based digital safety certificate to safeguard consumers and suppliers from risks triggered by the coronavirus (COVID-19). According to the press release shared with Blockchain.News, the digital certificate dubbed the Coronavirus Clearance Certificate (CCC), will be instrumental in reassuring stakeholders across supply chains that goods offered are risk-free.

Trailing the blockchain-powered digital certificate

The digital certificate is being touted to be a game-changer in picturing a post-pandemic scenario in the supply chain. As a result, the CCC is to be trailed by the 4th Industrial Revolution (4IR) Centre that mushroomed as a joint initiative between the non-profit Centre for Citizenship Enterprise and Governance (CCEG) and Birmingham City University.

COVID-19 triggers the challenge of trust in supply chains because individuals can no longer have faith in suppliers or goods. The Coronavirus Clearance Certificate is expected to change this equation once issued to products, people, and organizations by ascertaining that the laid down procedures needed to mitigate COVID-19 risks are followed to the letter.

Olinga Taeed, a visiting professor of blockchain at Birmingham City University, noted, “Consumers will demand in future that suppliers do everything in their power to avoid risk from COVID-19. People want to use goods and services, safe in the knowledge that there is no risk to themselves or others. For example, if you buy a hand sanitizer, you want to be sure it can do what it says on the label. The Coronavirus Clearance Certificate is a game-changer because it uses reliable blockchain technology to transparently track the life cycle of products, thereby building assurance.”

He added that blockchain is an ideal compliance tool when it comes to the future of purchasing, procurement, and logistics as a supplier has to stick to the highest standards of anti-bribery, sustainability, modern slavery, and public health.

Blockchain-enabled solutions

Blockchain technology is rising to the occasion to tame the coronavirus pandemic based on some of the solutions presented. For instance, the Coronavirus Clearance Certificate seeks to be an ideal tracking vehicle for any product’s life cycle like a hand sanitizer, and this is crucial for optimality purposes.

Recently, Spanish researchers deployed artificial intelligence (AI) and blockchain-powered app to flatten the pandemic’s curve by predicting its evolution using hybrid neuro-symbolic algorithms, as well as issuing digital identities.

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British Lawmakers Sense Risks Over Use of Digital Pound

As talks about the release of a digital pound by 2025 are yet to happen, British members of parliament are already doubtful that their use could harm financial stability, raise the cost of credit and erode privacy.

In order to fight private sectors from gaining total domination over digital payments and the fall of cash use accelerated in some cases due to the COVID-19 pandemic, central banks around the world have begun to focus on CBDCs.

CBDCs are a virtual form of fiat currency. A CBDC is an electronic record or digital token of a country’s official currency, according to Investopedia. A meeting of Britain’s central bank and finance ministry to discuss whether to move forward on a possible central bank digital currency (CBDC) will be held this year.

However, according to the report by a committee in the UK’s House of Lords, daily use of an e-pound could see people transfer cash from commercial banks accounts to digital wallets which could potentially spark financial instability in times of economic stress and increase borrowing costs. Also, the use of a digital pound would allow the central banks to monitor spending which could harm privacy, the report added.

“We were really concerned by a number of the risks that are posed by the introduction of a CBDC,” Economic Affairs Committee Chair Michael Forsyth said.

Forsyth also added that regulation could be a better tool to fight the threat of crypto issued by Big Tech firms, instead of introducing a digital pound that carries numerous risks.

However, on a potentially positive note, the report stated that securities trading and settlement could become more efficient with a wholesale use of CDBC to transfer large sums.

Britain’s central bank and finance ministry should consult on its advantages over the expansion of the existing settlements system, it said. Although talks are yet to happen, ultimately Britain’s parliament has the final say on any decision to launch an e-pound.

Global scenario

Speaking of the development of CBDC, the Bahamas became the first country to launch CBDC since 2020, called Sand dollar.

In Africa, Tanzania is planning to follow in the footsteps of Nigeria who became the African country to release their own version of CBDC called eNaira in 2021.

The Bank of Tanzania is exploring ways to introduce a CBDC on its monetary system to enhance the domestic payment system, according to Bloomberg.

“To ensure that our country is not left behind by the adoption of central bank digital currencies, the Bank of Tanzania has already begun preparations to have its own CBDC,” Bank of Tanzania Governor Florens Luoga said.

While many central banks across the world are studying digital versions of their currencies, China has been at the forefront of CBDC moves.

According to a January 5, 2022, report by Blockchain.News, the People’s Bank of China (PBoC) extended its pilot tests for the country’s Central Bank Digital Currency (CBDC) or digital Yuan to launch a new mobile wallet.

China’s efforts with respect to developing a CBDC have been well commended in the past years. The PBoC launched trials for the Digital Yuan back in 2020 and has conducted a number of transactions to showcase the efficacy of the CBDC in retail transactions, the report added.

On January 7, 2022, China’s WeChat – the world’s largest chat app – became compatible with payments using the digital yuan ahead of the Beijing Winter Olympics, owner Tencent Holdings said, according to Blockchain.News.

In Central America, Mexico is planning on publicly distributing the Digital Peso by 2024.

Banco de México, the Central Bank of Mexico, has revealed that its projected Central Bank Digital Currency (CBDC), dubbed the Digital Peso, will be up for public distribution by 2024, Blockchain.News reported.

'Small Number' of Crypto Firms Gain Temporary License from FCA

A “small number” of cryptocurrency companies in Britain have received an extension of temporary licences ahead of the April 1 deadline from the country’s financial watchdog, according to a report from Reuters.

The deadline was set up by the Financial Conduct Authority (FCA) to prove sufficient money-laundering controls.

According to the requirements from the FCA, crypto firms operating in the U.K. must have a license that shows sufficient checks and controls to stop money laundering and other criminal affairs such as terrorist financing.

The FCA, on its website, said that “we have concluded our assessments, and the temporary registration regime will close on April 1, for all but for a small number of firms where it is strictly necessary to continue to have temporary registration.”

However, the watchdog said that adding the firms to its list with temporary registrations will not mean that they are fit and proper.

On Wednesday, firms still operating under a temporary licence include relatively large players such as Copper Technologies and Revolut, a Reuters report stated.

This month, 90% of crypto firms have either cancelled their approval request for their anti-money laundering controls or have been rejected for not meeting the standards, David Raw, an FCA policy official, said.

While six companies – including crypto market maker B2C2 Ltd. and crypto digital banking apps Wirex Ltd. and Trastra Ltd. – were removed from the temporary register last week without securing full authorization.

According to a recent report from Bloomberg, crypto companies awaiting approval have already started looking at places abroad for relocation.

The deadline has prompted industry concerns about an exodus, the report added.

The FCA’s plan to close the temporary registration regime for crypto-assets has left some of the UK’s top industry competitors in limbo.

Bloomberg reported that the FCA had tightened crypto regulation in the UK as the demand and value of digital assets have increased among retail investors in the past two years. Only 33 firms have achieved permanent registration with the FCA.

The report added that Britain’s top financial authorities have also scrutinised the sector, including the Bank of England and the Treasury. They have been closely monitoring banks and investment firms chasing the hype around Bitcoin and other tokens.

Britain Eyes Becoming a Crypto Hub, Upgrading the Market by Adopting DLT

In pursuit of becoming a global crypto hub, the United Kingdom seeks to revamp the traditional financial market using distributed ledger technology (DLT), according to the finance ministry, as reported by Reuters.

By live testing crypto blockchain technology in activities like settlement and trading of bonds and stocks, the UK intends to make the financial market more efficient and innovative for users.

Per the report:

“In financial markets, the trading of stocks, bonds, and other assets traditionally involves three distinct activities of trading, clearing, and settlement. Using DLT could change this and allow financial assets such as bonds or stocks to be issued in hours rather than days or weeks.”

DLT projects will be tested using a financial market infrastructure dubbed “sandbox” from next year, according to the ministry’s director-general for financial services, Gwyneth Nurse. “A sandbox will allow testing new regulatory best practices and making permanent changes to ensure market users benefit,” Nurse added.

Nurse also pointed out that the Bank of England and the finance ministry were delving deeper into the digital pound as a public consultation was expected later this year.

The sandbox is expected to be rolled out simultaneously with the stablecoin regulation.

It seems a race against time for global governments to put up guardrails in the stablecoin arena following the shocking collapse of the algorithmic TerraUSD (UST) stablecoin, which triggered the loss of approximately $60 billion.

Meanwhile, In Asia, Japan recently passed a law stipulating that stablecoins would only be issued by licensed banks, trust companies, and registered money transfer agents to protect investors.