The UK is paving the way for cryptocurrency services, courting startups and established players, while pioneering groundbreaking legislation on stablecoins and non-fungible tokens.
But a lot has changed. After two years of deliberations, European Union lawmakers have reached an agreement on the Markets in Crypto-Assets (MiCA) regulation, marking a watershed moment for harmonized industry oversight on such a scale. This followed United States President Joe Biden’s executive order recommending a comprehensive government approach to responsible digital development in the United States.
The UK also saw major political changes during this period, including the resignation of Chancellor of the Exchequer John Glen, whose April speech in support of the industry represented the most emphatic by a British official to date.
While Glen broadly supported a regulated and encouraging framework for the sector, other UK institutions have expressed concern about the safety and sustainability of cryptocurrencies. In fact, on the same day as Glenn’s speech, Bank of England governor Andrew Bailey called the crypto market is an “opportunity for the pure criminal”.
It’s precisely these kinds of mixed messages that could hinder the growth of the industry just as the starting gun goes off. Uncertainty breeds stagnation. Evidence suggests that a lack of regulatory clarity has already put a damper on widespread consumer adoption of cryptocurrencies.
The industry will not be able to enjoy any comfort until the regulators get their thinking in line.
With a new Prime Minister and Government on the horizon, it is vital that whoever takes up residence in 11 Downing Street aligns the Government’s position with the Bank of England and the country’s regulators so that the UK becomes a real leader in innovative technology and standards composition.
The cryptocurrency sector has reached a point where it is gaining global recognition as an incubator for rapidly evolving financial technology and losing due to inconsistent approaches.
Facing a critical point in the fight for global cryptocurrency leadership
The crypto market holds approximately $1 trillion in value. This number will grow as consumer and commercial product adoption increases, creating jobs, improving financial inclusion and providing new alternatives to legacy systems in the financial services sector.
The UK is one of the leading fintech hubs in Europe and is in a fortunate position, equipped with the infrastructure, investment and talent to champion the crypto industry. But to cement that position, it must continue to attract the best challenger financial services brands. To achieve this, he needs to take a decisive and unilateral stance on cryptocurrencies — along the lines of Glen’s points — that shows he is The home for building and growing innovative digital asset companies. After all, effective economic regulations exist to protect consumers without stifling innovation that ultimately benefits them.
That’s not to say Bailey’s concerns about the potential for crypto to be used for illegal activity are unwarranted. However, addressing this point should not preclude the UK government from proving that it is not afraid of new technology and the positive changes that crypto in particular can bring.
To this end, Glen’s statements regarding the delivery of a financial market infrastructure sandbox and the establishment of a cryptocurrency engagement group are welcome steps that we believe will enable the UK to continue to act as a leader in this space in active partnership with the industry.
The value of having a unified approach to cryptocurrency regulation
Adopting a single unified approach to cryptocurrency regulation is also important. With MiCA, the EU is setting the bar and should be applauded for demonstrating the benefits of a unified approach to cryptocurrency regulation.
As the UK considers additional regulation in this area and the recently introduced Financial Services and Markets Bill moves through parliament, it is up to the UK to build on the EU’s approach to MiCA, working with industry and consumers to it discourages uncertainty and doubt.
The UK government has today published a 330-page Financial Services and Markets Bill.
It would roll back many post-crash reforms, including capital adequacy rules.
Impose a duty of competitiveness on the regulator – essentially a race to the bottom.
This will not have a happy ending.
— Prem Sikka (@premnsikka) July 21, 2022
Likewise, the upcoming consultation on the government’s approach to cryptoassets represents a good opportunity for policymakers to hear from industry about how best to build regulation that will protect businesses and consumers while giving the opportunity for innovation to thrive.
Of course, building regulations are only one part of the puzzle. Communicating government policy to those subject to regulation is just as important as policymakers’ understanding of the industry they regulate. To this end, strong public-private cooperation is crucial to adapt financial regulations to new technologies.
Only through a unified approach to cryptocurrency regulation will businesses have the confidence to operate in a market where authorities are fully invested in the success of the industry and consumers can feel protected by effective regulatory oversight.
To ease the current period of economic uncertainty, the UK should rely more on its flagship industries such as fintech to drive growth, create jobs and help the country “build back better”. To achieve this, it must encourage innovation in digital assets supported by a resilient and comprehensive regulatory framework. At this early stage, when many nations are seeking to seize the crypto crown, the UK cannot afford to allow mixed messages to derail its crypto ambitions.
The views expressed are solely the author’s and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended and should not be construed as legal or investment advice.