The Government took its first step towards regulation of the crypto market on Friday, when Treasury released a consultation paper outlining its plan “token mapping” the system. According to Treasury, token mapping is “the process of identifying the key activities and functions of products in the crypto [market] and mapping them against existing regulatory frameworks.” It is a “foundational step” in the regulatory process. The idea is to identify the economic functions performed by crypto activities and “map” them against the activities performed by traditional finance activities.  Treasury describes this as a “technology neutral and functional” approach to regulation. A key principle of this approach is that functionally equivalent products should be regulated “equivalently”. The token mapping project will seek to differentiate crypto products that have financial functions and those that don’t. Treasury expects that some elements of the crypto market may not fit existing regulatory models and may require new regulation. The token mapping project will cover crypto assets, crypto networks, intermediated token systems, smart contracts, decentralised finance and links to “real world” assets. Crypto functions will be mapped against a range of existing regulation, including financial services regulation, contract law and property law. The consultation paper concedes that the crypto market is complex and the Government needs to take care that any regulation is technically neutral, allowing business to innovate with appropriate regulatory oversight. The long-term regulatory plan is that after token mapping, the Government will turn its attention to licensing and custody reforms. The Government is seeking responses to a series of questions in the paper by March 3.