In the wake of the House of Commons Treasury Committee publishing its report on regulating crypto assets, Marina Reason, partner in Herbert Smith Freehills' financial services regulatory practice argues that whilst the report recommends regulating retail trading and investment activity in unbacked crypto assets as gambling, rather than as a financial service, this is "hugely different from what the government proposed in its February consultation on crypto assets regulation and certainly not how other jurisdictions are approaching this issue."
She explains that although the government is not obliged to follow the Treasury Select Committee recommendations, but will need to respond to them in due course, "it would be surprising if the government decides to move away from the proposals set out in its February consultation on the future regulatory regime for crypto assets because of the report recommendations. Yet a future administration with different leadership might. Much will depend on the speed at which the government proceeds with its plans to regulate crypto assets."
Noting that the report is not totally damning about crypto assets Marina adds: "The Committee clearly sees the potential for crypto assets technologies to improve the efficiency and lower the cost of making payments. What the Treasury Select Committee is most concerned about is giving risky and speculative activities the halo of financial services regulation. By comparison, in the EU, the formal adoption of the Markets in Crypto assets Regulation, or "MiCA", by the Council on 16 May was the last step in the legislative process.
She concludes: "MiCA is likely to enter into force in July 2023, with some provisions applying a year later and the rest from January 2025. It is not clear at the moment whether the UK would be in a position to follow a similar timeline."