Regulation of digital assets: proposals and minutes from Bank of England and more

By Wei Heng Tan


https://www.unidroit.org/wp-content/uploads/2021/06/DIGITAL-ASSETS-AND-PRIVATE-LAW-PROJECT.jpg)


What is meant by a digital asset?


Digital assets refer to assets that are transferred and secured digitally. A familiar example would be cryptoassets, which utilises cryptography and a public ledger to regulate, verify, and secure transactions.


Financial Markets Law Committee (FMLC): Uncertainty in Law


In a letter to HM Treasury, FMLC highlighted several areas of legal uncertainty in relation to the regulation of cryptoassets. First, the Committee highlighted the complex authorisation schema as a result of the dissonance between the Financial Services and Markets Act 2000 and several proposed regulations. The expansion of the financial promotions regime to include cryptoassets has also confused commentators. It is also unclear where the current proposed regime by the Financial Conduct Authority will end. This is an issue as the proposed regime will only extend to stablecoins (a cryptocurrency pegged to a reserve asset that ensures price stability) and not e-money.


Bank of England Proposals and minutes


In the CBDC (Central Bank Digital Currency) Engagement Forum, several pertinent issues, such as mitigating exclusion (in the, inter alia, digital, financial, and socioeconomic ambits), co-existence between CBDC, and other forms of money were discussed. A key issue was how CBDC could exist in harmony with the UK’s current payment landscape and its interaction with other forms of money. CBDC is a digital currency issued by the central bank pegged to the the UK’s fiat currency. In light of its risk-free nature, various proposals were given as to its practical implementation. One of them is the development of a “basic but extensible core platform” giving the private sector room to innovate and value-add.


Comments


With the growing prominence of different forms of digital assets, nations are rushing to regulate, promote and utilise them. However, it often surrounds balancing flexibility and security. It remains unclear the direction the UK is taking and more clarity regarding policy and technical parameters are required.