Government plans for 'robust' regulation of cryptoassets could create a one-sized approach that could hinder innovation. In a consultation document published today, the Treasury sets out ambitions to bring a broad sweep of cryptoasset activities into the ambit of rules governing traditional financial services. 

Regulation of cryptoassets will be brought within the regulatory framework established by the Financial Services and Markets Act 2000, 'taking advantage of the confidence, credibility and regulatory clarity that this existing system affords,' the Treasury said. 

Announcing the consultation, Andrew Griffith, economic secretary to the Treasury, said: 'We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes cryptoasset technology. But we must also protect consumers who are embracing this new technology - ensuring robust, transparent, and fair standards.'

The proposals published today would strengthen the rules around financial intermediaries and custodians. They would ensure crypto-asset promotions are fair, clear and not misleading, the Treasury said. However trading venues would be able to set their own rules for admission and disclosure requirements. 

Meanwhile, noting that only 14% of businesses applying for Financial Conduct Authority regulation have been approved under the current regime, the Treasury announced a time limited exemption for crypto promotions. Under this, cryptoasset businesses that are registered with the FCA for anti-money laundering purposes will be allowed to issue promotions while the broader regulatory regime is being introduced.

Syed Rahman, cryptocurrency specialist and partner at white-collar crime specialist Rahman Ravelli warned of the risk of over-hasty reaction to crypto scandals. 'Whilst regulation may spur growth in the long run, any knee-jerk reaction could have the opposite effect - it may actually cause problems for the regulators,' he said. 'Trying to adopt a one-size-fits-all approach could damage the crypto sector. Anything that is introduced to hinder innovation in the sector will undoubtedly have a more harmful affect.'

Consultation on the Treasury proposals will close on 30 April. Once legislation is laid, the Financial Conduct Authority will consult on its detailed rules for the sector, the government said.