United Kingdom to Remove Distributed Ledger Technology(DLT) From Crypto-asset Definition and Regulate Decentralised Finance(DeFi)
As part of the crypto-asset market regulatory measures, Her Majesty’s Treasury has put out a proposal to remove references to blockchain and Distributed Ledger Technology (DLT) in crypto-asset statutory definition in an attempt to be underlying technology-agnostic, and thus effectively rein in Decentralised Finance (DeFi) within the United Kingdom legal and regulatory landscape.
Source: Blockchain News
Her Majesty’s Treasury stated in the crypto-asset report proposal “Cryptoasset promotions: Consultation response” that there is a real industry evolutionary change possibility in the crypto-asset blockchain or Distributed Ledger Technology (DLT) use. In this light, it proposed that crypto-asset definition must enjoy exemption from blockchain and distributed ledger technology references, in order to “future-proof the definition for innovations.”. The precise proposal statement goes thus:
“While most cryptoassets currently use distributed ledger technology (DLT), it might be that this changes as the technology and industry evolve. Therefore, the government proposes to remove the reference to DLT from the definition of qualifying cryptoassets.”.
The question whether this is a forward-looking, and considered proposal remains quite open to a wide array of debates. Why? Because contrary to the statement, not “Most cryptoassets currently use distributed ledger technology (DLT)”. In fact, according to a Law Insider crypto-asset definition, which is quite close to accurate, all crypto-assets–without an exception–“can only and exclusively be transmitted” by using the blockchain technology, which is itself a type of distributed ledger technology. On the question whether crypto-assets in the future might not use blockchain or any other Distributed Ledger Technology(DLT), this is also speculative, and not feasible in the least.
There is no need whatsoever for a crypto-asset definition change proposal at this moment, or at any other time, in a constantly evolving and fast-growing crypto-asset market whose vocabulary naturally and organically continues to develop along with it.
In a similar breath, Her Majesty’s Treasury paper also touched upon regulating “on a case-by-case basis” the Decentralised Finance(DeFi); core coin-operated capitalism within Web 3.0 emerging Internet commerce protocol market activities. The official regulatory proposal paper reads:.
“Whether certain crypto assets lending activities or decentralised finance platforms are within the scope of the regime ultimately depends on the activities being carried out and promoted. As such, this will need to be considered on a case-by-case basis.”.
Source: Wikimedia Commons
In a similar vein, the Hong Kong Monetary Authority (HKMA) had sought last week to consider policy options, characteristics and possible downside of stablecoin and crypto-asset market regulation.
It is our considered submission that the sovereign regulators across jurisdictions—not just the United Kingdom—still have a long way to go with respect to proper appreciation of the blockchain and Distributed Ledger Technology (DLT)-based Web 3.0 revolution and the associated crypto-asset use cases for regulatory and other purposes.
Here is a raging Twitter conversation that could be followed up on the matter.