Proposed U.K. laws to regulate crypto suggest the jurisdiction might overtake its rival, the European Union, in the race to govern the sector.

A long-awaited consultation, originally promised for before Christmas, was published on Wednesday. It proposes a new authorization regime for any company operating from the U.K. or serving local clients – and has gained an immediate, and largely positive, reaction from the industry.

“As the voice of the U.K.’s crypto sector we welcome this positive step towards greater regulatory clarity,” said Ian Taylor, board adviser of lobby group CryptoUK. “Given the provisions within the proposed legislation, consultation with the industry could not be more critical.”

International crypto exchange Binance also said it welcomed the plans.

“Binance has vocally supported the need for effective and appropriate regulation to help with mainstream adoption of digital assets,” the company tweeted. “We welcome the next steps from the U.K. Government in making this happen.”

The U.K. Treasury has previously said it wants to make the country a crypto hub, with new rules needed to restore confidence after a turbulent 2022 – but firms that battled through a lengthy regulatory process to secure registration for money laundering purposes will hardly relish having to do it all again.

Register again

Crypto should be brought under existing rules laid out in the Financial Services and Markets Act (FSMA) dating back to 2000, the Treasury said – arguing that the alternative of a bespoke regime, of the kind introduced in the EU by the Markets in Crypto Assets regulation (MiCA), would overlap, distort competition and create confusion.

As such, the new regime would require crypto companies to register, to follow rules set by the Financial Conduct Authority and to meet anti-financial crime rules that are tougher than the money laundering regulations (MLR) under which firms are approved now.

“Crypto firms already registered under the MLR regime and carrying out those activities would be required to also seek authorization under the new FSMA-based regime,” the document said – a comment likely to generate apprehension from those who already dealt with the FCA.

Companies have already complained about lengthy delays and tough FCA procedures under the existing money-laundering rules. Just 41 companies out of a total 300 that applied under the existing system succeeded in gaining regulatory approval, and now face the prospect of having to seek additional authorization.

Where, what and when

The new regime has a broad scope in terms of geography, crypto types and activities. Foreign trading venues could be forced to set up a subsidiary in the country given their “critical role in the crypto asset value chain,” the document said. It would also apply to utility tokens and non-fungible tokens (NFT) if they are being used for financial services such as lending, payments or investment.

Currently the FCA only has oversight over companies based in the U.K. and that operate a crypto entity in the country. Extending it to anyone serving U.K. clients could prove significant – meaning that some of those 300 companies that opted to go abroad after failing to register would now have to gain FCA approval to serve clients in the country.

Read more: UK Finance Ministry to Propose Broad Rules for Crypto, Invites Industry Feedback

Crypto lenders would have to have clear contractual terms and adequate financial resources to avoid a repeat of collapses such as Celsius Network, Voyager Digital or BlockFi. That implies the U.K. could run ahead of its rivals in the European Union because MiCA doesn’t cover crypto lending.

The Treasury also wants to include a market abuse regime to prevent illicit activity from happening and to sanction practices that manipulate prices via pump and dump schemes, fake activities such as wash trading or anticipating trades through front running.

Regulations for stablecoins tied to fiat currency and used as a means of payment are already set out in the existing Financial Services and Markets Bill, and the next phase of rulemaking would cover a broad range of activities including operating an exchange, investment, lending and crypto custody. Algorithmic stablecoins like the ill-fated terraUSD are deemed risky and potentially volatile, and should be treated like other unbacked cryptos such as bitcoin (BTC), the document said.

A further third tranche of activities including crypto mining, post-trade activities like clearing and decentralized finance could be left until later, the paper suggested, while a few other areas – such as whether to regulate crypto staking and how to advertise the environmental impacts of crypto – still hang in the balance.

“There may not be justification to regulate the activity of mining in and of itself,” the consultation said, but added that it was interested in considering rules in linked areas like miner extractable value – where miners choose how to sequence transactions to maximize profits from other traders.

The consultation highlights problems in trying to supervise decentralized finance, a borderless business in which there’s no obvious entity to regulate. Ideas floated include regulating people who establish or operate a protocol, or code audits. However, the Treasury said it wants to wait for international norms and for greater clarity on the legal status of the decentralized autonomous organizations responsible for governance.

The consultation is open for comment from crypto firms, financial institutions, academics and others until April 30.

Read more: Proposed UK Rules Will Make Advertising Crypto a Lot Harder, Industry Warns