The UK cannot afford to send mixed messages on crypto
The UK is paving the way for cryptocurrency services, courting startups and established players, while leading the way in pioneering regulation of stablecoins and non-fungible tokens.
But much has changed. After two years of deliberation, EU lawmakers reached agreement on the Markets in Crypto-Assets (MiCA) regulation, marking a pivotal moment for harmonized oversight of the sector on such a scale. This followed US President Joe Biden’s executive order recommending a holistic approach to the responsible development of digital assets in the US.
Britain has also seen major political changes during this period, including the resignation of Chancellor of the Exchequer John Glen, whose April speech supporting the industry represented the most emphatic from a British official to date.
While Glen largely supported a regulated and nurturing framework for the sector, other UK institutions have expressed concerns about the safety and viability of cryptocurrency. In fact, on the same day as Glen’s speech, Bank of England Governor Andrew Bailey called the crypto market an “opportunity for the outright criminal.”
It is precisely this kind of mixed messages that can hinder the industry’s development just as the starting gun is fired. Uncertainty creates stagnation. Evidence suggests that a lack of regulatory clarity has already put the brakes on consumer adoption of cryptocurrency.
The industry will not be able to enjoy any comfort until regulators adjust their minds.
With a new Prime Minister and Government on the horizon, it is vital that whoever lives in 11 Downing Street reconciles the Government’s position with the Bank of England and the country’s regulators so that the UK can become a true leader in innovative technology and standards. surroundings.
The crypto sector has reached a point where it is both gaining global recognition as an incubator for rapid financial technology and missing out due to inconsistent approaches.
Facing a crisis point in the race for global crypto leadership
The crypto market has approximately $1 trillion in value. This number will increase as consumer and commercial adoption grows, creating jobs, improving financial inclusion and providing new alternatives to legacy systems in the financial sector.
The UK is one of Europe’s leading fintech hubs and is in a fortunate position, equipped with the infrastructure, investment and talent to champion the crypto industry. But to cement this position, it must continue to attract best-of-breed challenger brands in financial services. To achieve this, it needs to take a decisive and one-sided stance on cryptocurrency – consistent with the points provided by Glen – showing that it is the home for building and growing innovative digital assets. After all, effective economic regulations exist to protect consumers without stifling innovation that ultimately benefits them.
This is not to say that Bailey’s concerns about the possibility of crypto being used for illegal activity are unwarranted. However, raising this point should not prevent the UK government from demonstrating that it is not afraid of new technology and the positive changes crypto is specifically capable of delivering.
To that end, Glen’s statements regarding the provision of a financial market infrastructure sandbox and the establishment of a crypto-asset engagement group are welcome steps that we believe will allow the UK to continue to serve as a leader in this area in active collaboration with industry.
The value of having a unified approach to crypto regulation
Taking a single unified approach to crypto regulation is also important. With MiCA, the EU sets the standard and must be applauded for demonstrating the benefits of a unified approach to crypto regulation.
As the UK considers further regulation in this area and the recently introduced Financial Services and Markets Bill moves through Parliament, it will be appropriate for the UK to build on the EU’s approach with MiCA, working with both industry and consumers to counter uncertainty and doubt.
The UK government has today published a 330-page Financial Services and Markets Act.
It will roll back many post-crash reforms, including capital adequacy rules.
Impose on the regulator an obligation to competitiveness – in practice a race to the bottom.
This will not have a happy ending.
— Prem Sikka (@premnikka) 21 July 2022
Likewise, the upcoming hearing on the government’s approach to cryptoassets represents a good opportunity for policymakers to hear from the industry about how best to build the regulation that will protect businesses and consumers while allowing innovation to thrive.
Building regulations are, of course, only one part of the puzzle. Communicating government policy to those subject to regulation is as important as decision-makers understanding the industry they regulate. To that end, robust public-private cooperation is essential to adapt economic regulations to new technologies.
Only through a unified approach to crypto regulation will businesses have confidence that they are operating in a market where governments are fully invested in the success of the sector and consumers can feel protected by effective regulatory oversight.
To mitigate the current period of economic uncertainty, the UK will need to rely more heavily 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 underpinned by a robust and comprehensive regulatory framework. At this early stage, when a number of nations are seeking to seize the cryptocurrency, the UK cannot afford to allow mixed messages to thwart its crypto ambitions.
The opinions expressed are those of the author alone and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.
