The UK has formally set out plans to regulate the cryptocurrency industry "in line with that of traditional financial firms".

Among the proposals unveiled on 31 January was a move that would strengthen rules targeting financial intermediaries and custodians that store crypto on behalf of clients.

The UK would seek to establish a "robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms", the statement said. 

"We remain steadfast in our commitment to grow the economy and enable technological change and innovation — and this includes cryptoasset technology," said Andrew Griffith, economic secretary to the Treasury.

"But we must also protect consumers who are embracing this new technology — ensuring robust, transparent, and fair standards."

The plans would also enforce tougher transparency requirements on crypto exchanges to ensure they publish relevant disclosure documents and set out clear admission requirements for trading digital tokens.

Another measure would relax strict rules on crypto advertisements, allowing firms with Financial Conduct Authority registration to issue their own promotions while the broader crypto regime is being introduced.

The consultation will close on 30 April 2023, after which, the government will consider feedback and work to set out its consultation response.

Once the legislation is laid out, the Financial Conduct Authority will consult on its rules for the sector.

While the paper is reviewed, the Treasury said it is introducing a time limited exemption to allow cryptoasset firms to issue commercials while the broader regime is defined, despite a recent crackdown on misleading adverts.

Additionally, crypto companies which are registered with the FCA for anti-money laundering purposes will also be allowed to issue their own advertisements during the interim period.

In the notice, the Treasury described cryptocurrencies as a "relatively new, diverse and constantly evolving class of assets" that had both "a range of potential benefits" as well as "posing risks to the consumer".

In early reaction, Nigel Green, deVere Group CEO said: "The UK's decision to regulate crypto must be championed as digital currencies, including Bitcoin, are set to play an ever greater role in the domestic and international financial system, and they should be held to the same standards as the rest of the system.

"The news that digital currencies are being brought into the regulatory tent in one of the world's largest economies and most highly-regulated markets shows that crypto is now mainstream. It has come of age."