Partner Preston Byrne wrote an article examining the U.K.'s new cryptocurrency rules for the October issue of the International Journal of Blockchain Law.
The article, entitled "New U.K. Rules, While Strict, Nonetheless Avoid America's Securitarian Trap," compares and contrasts the U.K.'s approach to crypto with the U.S. approach, and criticizes the American approach to cryptocurrency regulation as being comparatively anachronistic and unfit for purpose.
Byrne's article discusses new financial promotion and broader financial regulatory rules in the U.K. which went into effect on Oct. 8 and are mandatory for anyone conducting cryptocurrency business in or to the U.K.
"The U.K.'s new rules on financial promotions – which include criminal penalties – have been criticized by market observers as being too strict," Byrne wrote. "Closer review of the rules, however, reveals a delicate balance between consumer protection and support for business growth and development. It is true that these rules are a departure from the U.K.'s prior hands off approach. Historically, the U.K. took a more laissez-faire approach to cryptoasset regulation than the United States. New rules change this."
Previously, the United Kingdom's financial regulators did not have much power to regulate – and thus did not regulate – cryptoassets in the same manner as other regulated investments, he wrote.
"This differs significantly from the position in the United States (U.S.) where the U.S. Securities and Exchange Commission (SEC) asserts enforcement authority over the cryptocurrency sector through the use of 90-year-old securities legislation, with critics alleging it has been prosecuting a politically motivated, bad faith regulation-by-enforcement campaign in the federal courts," Byrne wrote. [A]ll in all, despite the strictness of the U.K.'s new rules, meaningful – and, from a commercial perspective, material – differences in regulatory philosophies between the two countries remain."
Among those differences is U.S. regulators' insistence on using securities laws from the era of wireless telegraphy to regulate decentralized crypto-protocols, an approach Byrne criticizes as "securitarian," while the U.K., despite adopting strict rules around marketing cryptocurrencies, has, with its newest reforms, narrowly avoided falling into this trap.
"The U.K.'s approach, while strict, more accurately reflects underlying economic realities and real-world usage of cryptocurrency as encountered in the wild – and as likely to be encountered in the wild over the coming decade," Byrne wrote. "The U.K.'s model is, therefore, a regulatory model more likely to survive and succeed in the medium-term."
Read the full article here.
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