UK Treasury Excludes Unbacked Crypto

The United Kingdom Treasury Department has proposed excluding unbacked crypto assets and derivatives from its Digital Securities Sandbox plans.

In a consultation document published on July 11, HM Treasury stated that the regulatory sandboxes that will be established under the country’s Financial Services and Markets Act will allow the U.K. government the opportunity to modify existing crypto-related legislation, if necessary.

The proposed framework was intended to allow businesses to continue operating while the legislature contemplates where their products or services may fall under existing regulations.

According to the consultation paper, however, these considerations may not apply to “unbacked crypto assets,” for which regulations are “still evolving,” or derivatives.

Treasury stated that it would evaluate feedback on its proposed digital securities sandbox until August 2023, when the consultation will end. The framework indicated that Bitcoin and Ether may not qualify for inclusion in the Treasury initiative.

Legislators in the United Kingdom have previously referred to cryptocurrencies as “unbacked” and argued for their classification as wagering.

“Until there is greater clarity in these frameworks, we intend to use existing regulatory initiatives to develop policy and regulation for this asset class,” Treasury said about unbacked tokens.

Under the Financial Services and Markets Act, crypto companies operating in the United Kingdom will be required to adhere to certain regulations designed to promote innovative technologies while safeguarding consumers.

The Financial Conduct Authority issued a warning to businesses that, as of October 2023, the framework would only permit “four routes to lawfully communicate crypto asset promotions.