Britain is developing a new strategy to establish itself as a global crypto hub; however, it is confronted with significant obstacles, including opposition from local entrepreneurs and competition from the United States under President-elect Donald Trump.
The Labour administration of Britain has pledged to create a business environment that is conducive to the growth of businesses that are involved in blockchain and crypto-related activities.
In a recent speech, Tulip Siddiq, the U.K. Economic Secretary to the Treasury, stated that the government is committed to collaborating with firms to develop legal provisions for digital assets, such as stablecoins, which are tokens that are linked to the value of sovereign currencies, as early as feasible next year.
Additionally, she stated that the government would not consider crypto staking services, which provide rewards based on users’ token holdings, to be collective investment schemes. Crypto industry insiders were concerned that such a treatment would have resulted in onerous regulatory requirements.
Last week, Poppy Gustafsson, the investment minister of the United Kingdom, stated at an event organized by the U.K. division of the advocacy group Stand With Crypto, which is backed by Coinbase, that this sector has immense potential and is already playing a prominent role in the country’s vibrant tech landscape.
Gustafsson stated that the government is dedicated to the development and adoption of blockchain technology and is currently taking significant measures to ensure that we remain at the vanguard of this global innovation.
The Digital Securities Sandbox, a testbed for the development of novel distributed ledger technology-based solutions for the issuance, trading, and settlement of securities in a live, regulated environment, was one example she cited.
Another illustration is the “digital gilt” pilot, which was initiated last month with the objective of issuing U.K. government bonds on the blockchain.
Can the United Kingdom develop into a crypto hub?
Britain is currently advancing a number of regulatory proposals regarding cryptocurrency; however, there is a lack of consensus regarding its potential to become a globally significant location for the technology.
Steven Bartlett, a British entrepreneur famous for his “Diary of a CEO” podcast series, stated during a fireside discussion at the Stand with Crypto event that he is uncertain as to whether we have the policymakers, the government, the risk appetite, or the pro-entrepreneurship attitude necessary to fully capitalize on this generational opportunity.
Bartlett stated that, after visiting the San Francisco and London offices of his blockchain startup, Thirdweb, he has come to the realization that “it is incredibly unjust to attempt to establish a company in this location in comparison to being there.”
A survey released by the Financial Conduct Authority last month indicates that the demand for crypto products in the United Kingdom is increasing. The average value of crypto held by Brits increased from £1,595 a year ago to £1,842 ($2,337) this year.
A roadmap was also published by the FCA, which outlines its strategy for regulating the crypto industry. Over the next two years, the watchdog will release discussion papers on stablecoins, trading platforms, lending, and stake. A comprehensive regulatory framework is to be implemented by 2026.
Competition from America
Tom Duff Gordon, Coinbase’s vice president of international policy, stated on that the United Kingdom should not allow the regulatory momentum on cryptocurrency to slow down in the wake of Trump’s election victory.
On a notoriously pro-crypto policy platform, the Republican politician ran, promising not to sell bitcoin confiscated by the federal government and to succeed the current Securities and Exchange Commission Chair, Gary Gensler, who implemented an aggressive enforcement strategy against numerous crypto firms during his tenure.
Last month, Gensler disclosed his intention to relinquish his position as SEC chair on January 20, the date of Trump’s forthcoming inauguration.
During an interview conducted on the outskirts of the event, Gordon, a representative of Coinbase, stated that the United Kingdom has made significant strides. The U.K. has a substantial opportunity to achieve significant success in this field; however, regulatory clarity is necessary.
Gordon further stated, “We would appreciate secondary legislation regarding stablecoins and staking.” “The city minister referred to that — so we’re hoping to see that as well.”
Although Britain has implemented a regulatory roadmap, executives in the crypto industry are concerned that delaying the implementation of a comprehensive regime until 2026 could result in the country falling behind its transatlantic peers.
In a recent interview, Faryar Shirzad, Coinbase’s chief policy officer, stated that he now believes the United States is on the verge of approving federal crypto legislation “fairly quickly”—possibly as early as 2025.
In the meantime, the Markets in Crypto-Assets (MiCA) regulation, a comprehensive piece of legislation in the EU, is scheduled to be fully implemented later this month.
Growth is being impeded by outdated regulations
George McDonaugh, CEO of KR1, a publicly-traded digital asset investment firm that specializes in blockchain technology, stated that the outmoded regulations in the U.K. are preventing crypto-focused investment businesses like his from becoming more widely recognized publicly-traded names.
McDonaugh stated that KR1 has been attempting to trade on the primary market of the London Stock Exchange for years. However, it is unable to do so due to a 2018 rule that prohibits tokens such as bitcoin and ether from being included in publicly-listed vehicles.
McDonaugh stated, “Time has progressed since that time.” “We believe that we can unlock a tsunami of capital into the British markets by removing that restriction.”
It is the hope of experts that the FCA’s efforts to establish and execute a regulatory crypto framework will not impede innovation, but rather encourage and promote it.
The U.K. should draw inspiration from the EU, which has already taken a “leading position” on crypto regulation with MiCA, according to Irfan Baluch, a crypto counsel at Cripps.
Baluch stated that the FCA’s crypto regulation roadmap appears to be “a nod in the direction of addressing this issue — for now, at least.” The application of 20th century law to 21st century technology will only impede innovation and drive crypto businesses offshore.
Bartlett stated that the United Kingdom is currently presented with an extraordinary opportunity to take a decisive stance in the direction of innovation.
If we approach this in the manner that the United States appears to naturally adopt, we will not be the residual beneficiaries of blockchain or AI technology; rather, we can contribute significantly to ensuring that the value of these technologies is realized in this country. However, it must be revolutionary, he emphasized.
