04-08-2022 icon

Should we expect more cryptocurrency regulation from the UK?

By Lucy Adegbe

On April 4, 2022, the United Kindom unveiled several strategies in a bid to make the nation the global crypto technology hub. These initiatives cut across the regulation of stablecoins, as well as the Royal minting of a non-fungible token (NFT), with the support of the Financial Conduct Authority, of course.

With this development, a major question being asked is, should we expect regulatory authorities to close in soon on the crypto industry?

In the last 13 years, we’ve watched cryptocurrencies grow to stardom, and in terms of market capitalization, sophistication, and importance. And to push for more accountability, the government and regulatory authorities comprising the Bank of England, Prudential Regulatory Authority, and the FCA, have continued to develop and implement policies.

Past actions of the government and regulatory authorities have arguably focused on mainly the risks of digital assets without placing much consideration on the opportunities and innovations that come with the crypto industry.

Potential for crypto and digital assets

Speaking on the British Government’s plan to make the country a crypto hub, the U.K.’s economic secretary to the Treasury, John Glen, said the major goal is to ensure the UK becomes the best place to state and scale crypto organizations.

Currently, the UK government sees potential for stablecoins to deliver in terms of efficiency and speed in facilitating both local and international transactions, while promoting growth and financial inclusion.

A part of the government’s April 4th publication reads, “With appropriate protections, stablecoins could play an important role in facilitating improvements and competition in payments”.

Pathway to Regulation…

The government has said it will regulate stablecoins to enhance adoption and protect investors and businesses. This is even as the value of stablecoins are known to be linked to underlying stable assets such as the British Pound and other precious metals such as gold.

While authorities wish to prevent “opportunities for regulatory arbitrage between traditional e-money and stablecoins” they strongly believe that stablecoin regulation will ensure more innovation from responsible actors and protect the market and consumers.

Even though it is not known what the regulatory regime will look like, the legislation of e-money, payments, and expansion of e-money to include stablecoins; the use of stablecoins as a means of payment, as well as stablecoin exchanges and wallets operating under the jurisdiction of regulatory authorities, are all expected.

Earlier in February, the FCA announced plans to strengthen its activities by hiring 200 new employees in addition to the previous recruitment of senior personnel to fill several positions across supervision, policy enforcement, and competition.

Sarah Pritchard, FCA’s executive director for markets, had at the time said the regulatory body was looking to strengthen the UK’s capital markets.

Shortly after, the financial watchdog issued a warning to unregistered and non-compliant bitcoin ATM operators in the country to shut down activities. 

The FCA said, “None of the crypto asset firms registered with us have been approved to offer crypto ATM services,” stressing that those operating in the UK were doing so illegally.

Similarly, the financial watchdog in a March 24th publication, went on to remind regulated crypto firms, including Revolut of their existing obligations.