The Financial Services and Markets Act (FSMA) in the UK has officially come into effect, enhancing crypto regulation to support its secure adoption in the UK.

Yesterday, King Charles of the United Kingdom approved the Financial Services and Markets Bill (FSMB), marking the official enactment of the bill, which will empower regulatory authorities to oversee cryptocurrencies and stablecoins.

FSMB Considers Cryptocurrency as Regulated Entity

The Financial Services and Markets Bill (FSMB) in the UK, introduced in July 2022, grants regulatory bodies greater authority over the financial system, including cryptocurrencies. Amendments have been made to classify all cryptocurrencies as regulated entities, overseeing promotional activities of cryptocurrencies, and including stablecoins within the scope of payment rules.

The approval by the Royal Assent signifies the formal enactment of this bill. The UK Treasury, the Financial Conduct Authority (FCA), the Bank of England, and the Payment Systems Regulator will soon be able to develop more comprehensive rules to regulate the industry based on this legislation.

According to a press release from the UK Treasury, the UK aims to seize the opportunities of Brexit by adjusting financial services regulation.

Andrew Griffith, Economic Secretary to the Treasury, stated:

2023 will be a landmark year for our financial services reforms. This milestone legislation allows us to control our own financial services rules, supporting UK businesses and consumers, and driving economic growth.

Furthermore, the Financial Services and Markets Bill includes:

• Enhanced scrutiny of financial services regulators to ensure clear accountability, appropriate democratic input, and transparent oversight
• Removing unnecessary restrictions on wholesale markets - implementing key outcomes of the wholesale market review such as streamlining the listing review system, making the UK an attractive choice for company IPOs
• Legally protecting the freedom to access cash and providing crucial protection for victims of fraud
• Strengthening regulation of crypto assets to support their safe adoption in the UK
• Establishing sandboxes to promote the use of new technologies like blockchain in financial markets

UK Embraces Innovation with a Focus on Regulation

Rishi Sunak became the new Prime Minister of the UK in October last year, and his friendly stance towards cryptocurrencies and blockchain has sparked discussions. When the cryptocurrency venture capital firm a16z decided to establish an office in the UK in June, Rishi Sunak welcomed the move and highlighted the opportunities for the UK to play a significant role in cryptocurrencies and Web3 technology.

In April, Coinbase CEO Brian Armstrong visited the UK, offering various cryptocurrency-related suggestions and praising the UK's wise and fast progress in cryptocurrency regulation, hoping the UK would become a hub for Web3 economic innovation.

However, while the UK maintains an open and encouraging attitude towards new technologies like blockchain, it also strictly monitors law enforcement and consumer protection. In April, the FCA took enforcement action against Bitcoin ATMs citing anti-money laundering and regulatory factors; Binance's UK branch voluntarily withdrew its registration with the FCA; and FCA recently announced many new restrictions on cryptocurrency advertisers. Operating in the UK requires thorough compliance preparation.

For details on the new restrictions by the FCA on cryptocurrency advertisers, please see: End of Referral Code Master? Rejecting the Coin Circle Pyramid Scheme, UK FCA to Ban Referral Bonuses, Prohibit Anti-Inflation Claims