UK wants to be a ‘global hub’ for crypto, but will it happen?
Britain’s last attempt, which included plans to create an NFT, ended in tears. Two years on, and there’s another big challenge on the horizon.
The U.K. government has announced it’s taking another swing at fulfilling its ambition of transforming Britain into a “global hub” for crypto.
At the Innovate Finance conference in the City of London, Minister Bim Afolami spoke of the government’s commitment “to creating a regulatory environment that allows firms to innovate whilst also protecting consumers.”
The Economic Secretary to the Treasury unveiled plans to deliver legislation focused on stablecoins and staking, with the hope of getting it finalized by the summer. He declared:
“Once it goes live, a whole host of cryptoasset activities — including operating an exchange, taking custody of customers’ assets and other things — will come within the regulatory perimeter for the first time.”
Bim Afolami MP
It’s fair to say the Conservative government’s past policy pushes on crypto haven’t always gone to plan. Two years ago, the finance ministry had revealed it was working on launching an official non-fungible token in conjunction with the Royal Mint, which makes the country’s fiat coins. This was quietly shelved the following year, with rival politicians arguing that the cost-of-living crisis and rampant inflation should have been more of a pressing concern.
That being said, some progress has been made as the U.K. tries to give crypto firms clearer rules of the road to follow. In June 2023, the government proudly claimed a newly approved Financial Services and Markets Bill was a “rocket boost” for the economy — as it opened the door for digital assets to be regulated so they could be safely adopted by British consumers.
Figures from the country’s Financial Conduct Authority suggested that 9% of adults, about five million Britons, owned cryptocurrencies as of August 2022 — a figure that will have grown further as the markets roar back to life. But there is another motivation for the Conservatives and Prime Minister Rishi Sunak: attracting investment following Brexit.
Major crypto firms have been left exasperated by ongoing uncertainty in the U.S. — with the likes of Coinbase accusing the Securities and Exchange Commission of “regulation by enforcement.” A friendlier climate across the pond could encourage businesses to make the switch.
Bivu Das, Kraken’s U.K. managing director, told crypto.news that well-drafted legislation would give exchanges much-needed clarity:
“The U.K. is already an appealing destination for crypto businesses to invest resources. It has a pro-crypto government, an extensive talent pool with deep fintech expertise, and a history of financial services and capital markets. New crypto legislation is just another milestone in the U.K.’s journey towards becoming a global crypto hub.”
Bivu Das
Das said championing innovation while safeguarding consumers from risks was crucial — and expressed optimism despite the challenge of regulating the trading of decentralized assets:
“The promise of decentralised finance is real and this technology has the potential to revolutionise how everyone interacts with financial services. The U.K. government is right to initially focus on regulating centralised entities and to build a regulatory perimeter for firms to operate in. We look forward to working with all stakeholders as this framework continues to evolve.”
Bivu Das
While there was plenty of bullishness from Afolami as he rubbed shoulders with fintech leaders, there’s no guarantees that the government’s crypto legislation will see the light of day.
A general election has to be called in the U.K. by January 2025 at the latest — and following a slew of controversies and scandals, not to mention two unelected prime ministers, the Tories are languishing behind in the opinion polls.
Sunak has been tightlipped about when a vote might be held and appears to be holding out in the hope that the economy will improve — with the cost-of-living crisis easing as a result.
Labour is projected to deal a crushing defeat to the government as it returns to power for the first time in 14 years, but may not be as forthcoming with pro-crypto policies.
There was no mention of crypto at all in Labour’s 28-page dossier setting out its plan for financial services, which was released in January. However, the party did reveal it wants to make the U.K. a “global hub” for tokenization instead — and drive forward the development of a central bank digital currency.
For now, work on developing a digital pound — informally known as “Britcoin” — is moving at a glacial pace. The Bank of England remains undecided on whether to create a CBDC, with concerns about privacy dominating responses to a recent consultation.
With the prime minister weakened, and a new occupant in Downing Street now looking almost inevitable, there are no guarantees that the government’s “crypto hub” will be realized in the coming months.
