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<p>The Government established a Cryptoassets Taskforce in 2018, consisting of HM Treasury,
the Bank of England and the Financial Conduct Authority (FCA). The Taskforce’s objectives
include exploring the impact of cryptoassets, the potential benefits and challenges
of Distributed Ledger Technology (DLT, which includes blockchain technology) in financial
services; as well as monitoring ongoing developments in cryptoasset markets.</p><p>
</p><p>These crypto technologies could have a profound impact across financial services,
including reducing risk, working capital, and disintermediating friction. However,
there are also associated risks. As the Bank of England’s Financial Policy Committee
noted, as crypto technologies grow and become more interconnected with the core financial
system we’ll need to ensure that regulators have the right tools to manage the associated
risks. That is why the Government is taking forward a number of regulatory initiatives
to manage risks and support innovation so that people and businesses can use new technologies
both reliably and safely.</p><p> </p><p>The Government is putting in place a Financial
Market Infrastructure (FMI) Sandbox, which will enable firms to experiment with the
use of new technologies like DLT in providing the services that underpin financial
markets. The Government is also exploring the possible use of DLT in the issuance
and lifecycle of a sovereign debt instrument. Further details on this research programme
will be set out in due course.</p><p> </p><p>The non-fungible tokens (NFTs) market
is evolving rapidly and remains at an early stage of development. Most NFTs are not
currently subject to financial services regulation in the UK and the Government has
proposed to exclude them from the financial promotions regime on the basis that NFTs
can represent a wide array of different assets which might constitute non-financial
services products. The Government will continue to closely monitor how NFTs are used
in financial services and take further action if necessary.</p>
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