Crypto assets in the UK: Navigating opportunities and challenges in a dynamic landscape

It may be helpful to select an executor with some knowledge of or familiarity with cryptocurrencies. As cryptocurrencies are generally held anonymously, a will should also establish the existence of the cryptocurrency (e.g., by identifying and cataloguing the relevant cryptocurrency) as an asset to be distributed to https://www.xcritical.com/ beneficiaries. A method must also be established to ensure that passwords to digital wallets and external drives storing cryptocurrency are accessible by a trusted representative. Unlike a bank account, which can be frozen or have access restrictions placed upon death, anyone can access a digital wallet, so care should be taken to ensure that external drives and passwords are not easily accessible on the face of the will. This may include providing a memorandum of passwords and accounts to the executor to be placed in a safe custody facility that remains unopened until a will is called upon.

The Cryptoasset Promotion (Regulation) Order 2021

To ensure continuous compliance, businesses should consider establishing dedicated compliance teams or partnering with regulatory specialists, and implement robust internal systems for tracking and documenting all compliance-related activities. All CASPs must demonstrate proper segregation of customer assets from company funds, maintain stringent data protection measures, and implement thorough AML/KYC procedures. To ensure compliance, businesses should conduct detailed internal assessments of their operational functions, security frameworks, and transparency practices well in advance of this final 2026 deadline. Starting January 2025, Crypto Asset Service Providers (CASPs) must begin applying for licenses to operate within the EU. A grandfathering period of up to 18 months allows Anti-Money Laundering (AML) existing providers to continue operations while transitioning to full compliance. This provision permits EU member states to let existing crypto service providers operate from December 30, 2024, up to July 1, 2026, depending on each state’s chosen duration.

Cryptocurrency regulation: Rules are in development

The number of crypto assets users also increased from 35 million in 2018 to 221 million in June 2021. The UK is one of the leading markets for crypto assets, with an estimated 10% of UK adults owning some form of crypto blockchain payments assets, according to a survey by the FCA. This collective stance has led to friction with the region’s traditional banking industry and in Chile, for example, some banks took steps to close accounts held by cryptocurrency exchanges in late 2018.

Cryptocurrency Regulation Tracker

Cryptocurrency is legal throughout most of the European Union (EU), although exchange governance depends on individual member states. Furthermore, China banned Bitcoin mining in May 2021, forcing many engaging in the activity to close operations entirely or relocate to jurisdictions with a more favorable regulatory environment. Enacted in 2000 at the height of the e-commerce boom, the E-SIGN Act validates electronic signatures and records in interstate and foreign commerce, making electronically entered contracts legally binding. Similarly, UETA grants legal status to electronic records and signatures, treating them in the same measure as traditional paper documents.

• The regulator is experimenting with introducing central bank digital currencies for international settlements under Project Ubin+.
• The country’s Finance Bill of 2022 defined virtual digital assets as property and outlined tax requirements for collecting taxes on income from them.
• In 2021, the Government proposed reverting back to the comparable jurisdiction regime (with some amendments).
• Double-entry bookkeeping achieves the goal that external stakeholders can verify the internal accounts of the company.
• China is the world’s second-largest economy and an important member of these three international organizations.
• In 2019, HB 550 included virtual currency in the definition of property under Vermont’s Revised Uniform Unclaimed Property Act.
• Breaches of the obligation to publish a prospectus are subject to severe sanctions, including under criminal laws.

The role of global governance institutions

However, a cryptocurrency such as Bitcoin is a decentralized specific virtual commodity, and the holder of the cryptocurrency does not have the right to claim the central issuing agency. Therefore, cryptocurrency cannot be an object of creditor’s rights because it does not have the nature of creditor’s rights. To discuss the supervision of cryptocurrency, firstly the legal attributes of cryptocurrency must be clarified, that is, what kind of object is it in nature. Is it the object of creditor’s rights, the object of intellectual property, or the object of ownership? The characterization of legal attributes can help the accurate application of laws on the one hand, and provide clear guidance for subsequent legislation and amendments on the other.

Following a number of prominent cyber breaches in Australia, legislators and regulators have prioritised industry awareness and action with respect to cyber resilience and enhanced investment in digital infrastructure to prevent data breaches, technology failures and system outages. ASIC has stated that it will use this power to issue further inquiries into crypto asset issuers and their advisers to identify potentially unlicensed and misleading conduct. A range of significant consequences may still apply for failing to comply with the ACL or the ASIC Act, including monetary penalties, injunctions, compensatory damages and costs orders. Clarity regarding the application of Australian regulatory regimes to the blockchain and cryptocurrency sector has been iterative.

From the above analysis, it can be seen that since cryptocurrency is the object of ownership in civil law, it can be regarded as property in criminal law, and the act of stealing cryptocurrency can constitute a crime of theft of property. The main reason why some scholars oppose Bitcoin as an object of ownership stems from Article 2(2) of China’s Property Law. Zhao (2017) believes that to become an object of the property law, it needs to comply with the “things” and “rights stipulated by law”, and the “things” stipulated therein are limited to tangible things. Therefore, Bitcoin is not a legal right; at the same time, because Bitcoin is completely virtual, people cannot find the real carrier of Bitcoin and then think that it is not a physical thing. From the aspect of material manifestation, the distinction between “thing” is an understanding of the mechanical surface of “thing”. Tangible objects include real estate, movable properties, and objects that do not occupy a certain space or have a certain shape but can be controlled by human power, such as electricity, gas, light waves, and magnetic waves.

They should also carefully identify and analyse the operational and legal consequences, management options and approaches and potential operational change requirements. In preparation for the general application date of 30 December 2024 of MiCA and the TFR, applicants will only have limited time to implement the various requirements of MiCA. However, MiCA also provides for a reverse solicitation regime allowing third-country firms to answer to requests from EU consumers looking to receive crypto-asset services by a third-country firm on their own initiative. But this regime does not apply where a third-country firm solicits clients in the EU or promotes or advertises crypto-asset services or activities in the EU. ESMA is mandated to issue, by 30 December 2024, guidelines to specify the situations in which a third-country firm is deemed to solicit clients established or situated in the EU.

Major cryptocurrency exchanges Coinbase, Binance, and Gemini have all registered as money transmitters in Delaware. The EO also paves the path to increasing international cooperation on digital asset regulation. At its core, blockchain is a decentralized, permissionless, and trustless database technology where the authenticity of records is verified not by a trusted third party, but through cryptographic proof2. A smart contract is a computer protocol (code) designed to digitally facilitate, negotiate, and execute the terms of a contract3. Smart contracts record terms and automate the performance of contracts in a trackable and irreversible manner4. The definition of crypto tokens is less established5; instead of offering a clear definition, commentators often jump straight to technical and functional descriptions or classifications6, indicating that social context is missing.

Once someone uploads false information, who is packaging and recording the information cannot be determined in advance. The bill would grant the Attorney General jurisdiction to enforce any violation of the law, issue subpoenas, impose civil penalties of $10,000 per violation per individual or $100,000 per violation per firm, collect restitution, damages, and penalties, and shut down businesses engaging in fraud and illegality. The bill would also codify DFS’ authority to license digital asset brokers, marketplaces, investment advisors, and issuers prior to engaging in business in New York and allow DFS to oversee the digital asset licensing regime. Millions of investors have lost hundreds of billions in the value of their cryptocurrency investments because of rampant fraud, including market manipulation, hacking, and opaque business practices.

Cryptocurrency regulations across jurisdictions can range from detailed rules designed to support blockchain users to outright bans on the trading or use of cryptocurrencies. Attempts to regulate blockchain should be reconnected to the underlying legal systems at large. Large parts of the economy and commerce operate within the framework of private law, and there is little reason for that to change in the blockchain-driven domains, except for narrowly defined cases where systemic risks need to be addressed. Blockchain technology simply provides a new form of embodiment for private law commerce, rights, obligations and assets, most of which are based on long-established legal concepts and instruments. There is little justification for introducing permissioned legal frameworks for free virtual markets, daily commerce, and individual rights to own and transact in them, regardless of the new forms that these phenomena may adopt. This basic system of rights has existed since at least Ancient Rome and has been well developed in Roman law50, as well as independently re-developed in common law legal systems.

GAO is also making seven recommendations (one to each of seven financial regulators) to establish a (or adapt an existing) coordination mechanism to identify and address blockchain-related risks. In April 2023, Parliament approved measures that allow legislation requiring certain crypto service providers to seek an operating license. This legislation is intended to give regulators the tools they need to track crypto being used for money laundering and terrorism funding while providing users with protections. There are cryptocurrency-specific reporting requirements relating to Know Your Client (KYC) standards, as well as anti-money laundering (AML) and combating the financing of terrorism (CFT).

The anonymity of cryptocurrency brings forth the problem of difficulty in determining the subject of legal responsibility, and it is easy to be used for terrorist financing, money laundering, dark web transactions, and other illegal and criminal activities. This sector is not without its challenges and difficulties, as clients may face various legal, regulatory and practical hurdles and obstacles when engaging in crypto assets activities in the UK. Crypto assets rely on complex and novel technologies, such as cryptography and DLT, which may pose technical and operational challenges for clients and the legal profession. For instance, crypto asset transactions may be irreversible, immutable and anonymous, which may limit the ability to recover funds or identify the parties involved in a dispute.

In recent years, a large number of P2P thunderstorms in the name of “Technology Finance” have sounded the alarm for the rule of law in blockchain finance. Industrial development must be synchronized with supervision, otherwise, it will cause huge losses to the public and government credibility. To achieve the goal of the rule of law of the blockchain, it is necessary to provide a completely legal basis for the supervision of the blockchain (De Filippi and Wright 2018).