UK to Create Its Own NFT and Advance Crypto Regulation

In this photo illustration a new bitcoin token is pictured on £10 notes.

Matt Cardy | Getty Images

LONDON — The UK government on Monday announced plans to create its own non-fungible token, as part of a drive to become a “world leader” in cryptocurrencies.

Finance Minister Rishi Sunak has asked the Royal Mint – the government company responsible for minting coins for the UK – to create and issue the NFT “by summer”, the official said. City Minister John Glen at a fintech event in London. “There will be more details available very soon,” he added.

The initiative is part of a broader government effort to “lead the way” in crypto, according to Glen. The minister announced a number of steps the UK will take to subject digital assets to greater regulatory scrutiny, including plans to:

  • Integrate certain stablecoins into the UK payment framework so that stablecoin issuers and service providers can “operate and grow in the UK”
  • Consult on a “world-leading regime” to regulate trade in other cryptocurrencies, including bitcoin.
  • Ask the Law Commission to examine the legal status of blockchain-based communities, known as Decentralized Autonomous Organizations, or DAOs.
  • Examine the tax treatment of decentralized finance (DeFi) lending and “staking,” which gives crypto users the opportunity to earn interest on their savings.
  • Establish a Cryptoasset Engagement Group which will be chaired by ministers and host members from UK regulators and crypto businesses.
  • Explore the application of blockchain technology in issuing debt instruments.

“We shouldn’t think of regulation as a static, rigid thing,” Glen said. “Instead, we should be thinking in terms of regulatory ‘code’ – like computer code – which we refine and rewrite when we need to.”

CNBC previously reported on government plans to unveil a regulatory framework for cryptoassets and stablecoins.

Stablecoins, cryptocurrencies that derive their value from sovereign currencies like the US dollar, are a fast-growing but controversial phenomenon in the crypto world.

Tether, the largest stablecoin in the world, has a circulating supply of over $80 billion. But it has drawn criticism over a lack of transparency around the reserves that back the token.

Glen said the government is also “broadening” its gaze to look at other aspects of crypto, including the so-called Web3, a movement that offers a more decentralized version of the internet based on blockchain technology.

“No one knows for sure yet what Web3 will look like,” Glen said. “But there is every chance that blockchain will be an integral part of its development.”

“We want this country to be there, leading from the front, seeking the greatest economic opportunities.”

Mixed signals

Industry insiders have demanded clarification on the UK’s stance on crypto as policymakers around the world begin to take a closer look at the $2 trillion market.

Last month, US President Joe Biden signed an executive order urging government-wide coordination on crypto regulation. This decision was seen as generally positive for the sector.

Meanwhile, European Union lawmakers recently voted against measures that would have jeopardized the future of cryptocurrency mining. However, they also passed new rules cracking down on anonymous crypto transfers.

Back in the UK, UK regulators have taken a tough tone on digital assets.

The Financial Conduct Authority shunned a large majority of crypto firms applying to be registered with the watchdog, warning it fears too many “financial crime red flags” are going unnoticed.

Last week, the FCA extended a crucial deadline for crypto firms on a temporary ledger – which includes Revolut and Copper – to obtain full clearance. Philip Hammond, the former British finance minister, is an adviser to Copper.

Several companies have been forced to terminate their UK crypto operations and relocate overseas after failing to be listed on the final register, including, B2C2 and Wirex. Only 33 companies have been approved by the FCA.

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