Treasury reveals ‘world-first’ proposals to regulate cryptocurrency
The Treasury has revealed proposals to regulate cryptocurrency, following widespread calls for action after the spectacular collapse of one of the world’s largest trading exchanges.
Promising a “robust” approach to digital assets consistent with traditional finance, the government says it wants exchanges to have fairer and tighter standards.
Under the plans, crypto platforms would become responsible for defining the demands that a currency must meet before being admitted for trading.
Exchanges will also be held accountable for safely facilitating transactions and keeping customer assets safe.
It comes after the deputy governor of the Bank of England told Sky News that crypto trading is “too dangerous” to remain outside mainstream regulation.
Speaking in light of the sudden bankruptcy of crypto platform FTX, Sir Jon Cunliffe described the market as “incredibly volatile” and said investors needed more protection.
Some 80,000 UK-based customers were impacted by the collapse of the world’s second-largest crypto exchange, with one British investor left with a £1m hole in his finances.
FTX‘s disgraced founder, Sam Bankman-Fried, has since pleaded not guilty to stealing billions of dollars in customer money.
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‘Regulate crypto before systemic problem’
Are the government’s plans sufficient?
The proposals – which Labour said had arrived too far too late – come as the crypto industry seeks to regain the confidence of spooked investors.
Since FTX collapsed, wider market turmoil has seen Bitcoin, the world’s biggest token, fall to a five-month low and major exchange Coinbase cut 20% of its workforce.
Less than a year ago, Rishi Sunak, then chancellor, said he wanted the UK to be a “global crypto asset hub”.
Andrew Griffith, economic secretary to the Treasury, said the government was still committed to enabling crypto, but stressed the need to “protect consumers who are embracing this new technology”.
The plans will first be submitted to a consultation, but the Treasury claims the regulation will be a “world first”, suggesting it should arrive before the EU’s expected crypto legislation in 2024.
In the meantime, the Treasury announced it would be introducing a time-limited exemption to let more crypto asset companies issue promotions following a crackdown on “misleading” adverts.
Firms that are registered with the Financial Conduct Authority for anti-money laundering purposes will be allowed to while the broader regulation is being introduced.
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‘We’ve been waiting a long time’
Crypto fraud expert Louise Abbott, a partner at Keystone Law, welcomed the proposals.
She told Sky News that the lack of regulation in crypto made it “hugely attractive to fraudsters”.
“We have been waiting in this industry for a long time,” she said.
“I deal with fraud and have seen a dramatic increase in crypto scams and fraud in the past 10 years. Last year, I was getting daily enquiries from potential victims who have been defrauded through a crypto scam.”
Ms Abbot hopes the regulation could be in place as soon as the summer, adding that it was in the interests of both exchanges and investors for greater oversight of the market.
Major industry players including Binance chief Changpeng Zhao, who saw his platform banned in the UK in 2021, and Coinbase’s Brian Armstrong have previously welcomed the prospect of more regulation.
“Unless we become a safer environment, investors will not invest in the way we have seen,” Ms Abbot added.
Varun Paul, former head of fintech at the Bank of England, now of crypto infrastructure provider Fireblocks, also described the plans as a “positive step”.
He told Sky News that industry turmoil meant there was a need for “clear rules”, and expressed hope that the UK’s regulation would do the job while still encouraging innovation.
Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.
A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.
They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.
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Electronic devices were seized from the suspects and are currently being analysed by forensic experts.
M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.
The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.
Disruption is expected to continue at the retailer until the end of this month.
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Mickey Carroll in May answered why M&S cyber attack was so bad.
The Co-op and Harrods were also subsequently targeted by hackers.
Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.
He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”
The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.
The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.
The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.
Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.
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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.
“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.
It is estimated that the cyber attack will cost M&S up to £300m this year.
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Days after M&S was attacked, the Co-op was targeted and forced to shut down some internal systems.
Harrods was then hacked, and also had to shut some systems despite its website and shops continuing to operate.
Of those arrested, a 17-year-old British male and a 19-year-old Latvian male were from the West Midlands.
A 19-year-old man was from London and a 20-year-old woman from Staffordshire.
Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.
From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.
The post will still be delivered within three working days of collection from Monday to Friday.
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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.
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