The United Kingdom is actively looking to regulate the crypto market and has proposed many new policies to bring various crypto markets under the rule of law. However, among the various proposed suggestions, what turned many heads is the request to remove blockchain and distributed ledger technology (DLT) references from the definition of crypto assets.
A new crypto report titled “Cryptoasset promotions: Consultation response” from the Her Majesty’s (HM) Treasury noted that, while most crypto assets use DLT or blockchain as an underlying technology, this might change over time as the industry evolves. Thus, crypto assets must be exempt from the reference of DLT to “future-proof the definition for innovations.” The official statement said:
“Most crypto assets 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 crypto assets."
Apart from the controversial crypto-asset definition change, the HM Treasury paper also discussed bringing decentralized finance (DeFi) under the scope of regulation on a case-to-case basis and said the government would closely monitor the fast-growing industry. The official paper read:
"Whether certain crypto assets' lending activities or decentralized 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."
Many crypto proponents believe the removal of references to blockchain and DLT, as proposed by the committee, could endanger the decentralized nature of the crypto market. For example, Chinese CBDC e-CNY or digital yuan is said to be based on blockchain technology, however, it’s more of a private blockchain and highly centralized, controlled by the government. The British government seems to be following a similar path with a definition change.