The UK cannot afford to send mixed messages on crypto
The UK is paving the way for cryptocurrency services, attracting startups and established players, while leading the way in pioneering regulation of stablecoins and non-fungible tokens.
But many things have changed. EU lawmakers have agreed on regulation of the crypto asset market (MiCA) after two years of deliberation, marking a pivotal moment for such a large-scale unified regulation of the industry. This comes after US President Joe Biden issued an executive order recommending a whole-of-government approach to the responsible development of digital assets within the United States.
There have also been major political shifts in the UK during this period, including the resignation of Finance Minister John Glenn, whose April speech in support of the industry was by far the most emphasised by a British official.
While Glen broadly supports the industry’s regulatory and nurturing framework, other UK institutions have expressed concerns about the security and viability of cryptocurrencies.In fact, on the same day as Glenn’s speech, Bank of England Governor Andrew Bailey Call The crypto market is an “opportunity for downright criminals.”
It’s this mixed message that could hold the industry back when the starting gun goes off. Uncertainty leads to stagnation. There is evidence that a lack of regulatory clarity has hindered widespread consumer adoption of cryptocurrencies.
The industry won’t enjoy any comfort until regulators adjust their thinking.
With a new Prime Minister and a new government on the horizon, whoever lives at 11 Downing Street will have to align their positions with the Bank of England and national regulators so that the UK can become a true leader in innovative technology and a standards environment.
The crypto industry has reached a point where it is both gaining global recognition as an incubator for fast-moving financial technologies, but also missing opportunities due to inconsistent approaches.
Facing a key point in the race for global cryptocurrency leadership
The crypto market is worth about $1 trillion. This number will increase as consumer and business adoption grows, creates jobs, improves financial inclusion, and provides new alternatives to legacy systems in the financial services sector.
The UK is one of Europe’s leading fintech hubs and finds itself in a fortunate position with the infrastructure, investment and talent to support the crypto industry. But to cement that position, it needs to continue to attract best-in-class challenger financial services brands.In order for this to happen, it must take a decisive and unilateral stance on cryptocurrencies — in line with what Glenn has made — suggesting it is This Home to build and grow innovative digital asset companies. After all, effective financial regulations exist to protect consumers, not stifle innovation that ultimately benefits them.
That’s not to say Bailey’s concerns about the potential for cryptocurrencies to be used for illicit activities are unfounded. But addressing this shouldn’t stop the UK government from proving that it’s not afraid of new technology, and the positive changes that cryptocurrencies in particular can offer.
To that end, Glen’s statement on delivering a financial market infrastructure sandbox and establishing a crypto asset engagement group are welcome steps that we believe will bring the UK to the industry.
The value of a unified approach to crypto governance
A single, unified approach to cryptocurrency regulation is also important. With MiCA, the EU has set a benchmark and must be applauded for demonstrating the benefits of a unified approach to crypto regulation.
As the UK considers additional regulation in this area and the new Financial Services and Markets Act passes Parliament, it is time for the UK to build on the EU and MiCA’s approach to work with industry and consumers to remove uncertainty and doubts.
The UK government today released the 330-page Financial Services and Markets Act.
It would overturn many post-collapse reforms, including capital adequacy rules.
Imposing competition responsibility on regulators – effectively 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 presents a great opportunity for policymakers to learn from the industry how best to establish regulations to protect businesses and consumers, while enabling innovation to flourish.
Of course, building regulation is only part of the puzzle. Communicating government policies to regulated persons is as important as policy makers’ understanding of the industries they regulate. To this end, strong public-private partnerships are essential to adapt financial regulation to new technologies.
Only through a unified approach to crypto 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 regulation.
To ease the current economic uncertainty, the UK will need to rely more on flagship industries such as fintech to drive growth, create jobs and help the country “build back better”. To achieve this, it needs to encourage innovation in digital assets supported by a resilient and comprehensive regulatory framework. At this early stage, when many countries are looking to claim the crypto crown, the UK cannot allow mixed messages to hinder its crypto ambitions.
The views expressed are those of the author alone and do not necessarily reflect the views of Cointelegraph. This article is for general informational purposes only and is not intended and should not be considered legal or investment advice.