The UK Treasury Department has proposed that unbacked crypto assets and derivatives be excluded from its digital securities sandbox project. This recommendation was outlined in a consultation paper published on July 11.

The paper suggests that regulatory sandboxes, formed under the country’s Financial Services and Markets Act, would allow the UK government to amend existing crypto regulations if necessary. However, the proposal indicates that these considerations may not apply to “unbacked” crypto assets and derivatives, as the laws for these assets are still being developed.

The Treasury Department has announced that it will accept input and recommendations on its proposed digital securities sandbox until the consultation period concludes in August 2023. Given the proposed framework, it is possible that even established cryptocurrencies such as Bitcoin and Ethereal you may not be eligible to participate in this initiative.

There are continuing signs that the UK is tightening cryptocurrency regulations.

UK lawmakers have referred to cryptocurrencies as “unbacked” and suggested they should be classified as a form of gambling. They have also advocated for the categorization of blockchain technology as a form of gambling.

The UK Financial Conduct Authority has warned companies that the framework, due to start in October 2023, will only allow for four legal routes to promote crypto assets.

The Financial Services and Markets Act will impose specific regulations on companies operating in the UK that trade cryptocurrencies. These rules are intended to encourage the development of innovative technologies while protecting the interests of consumers.