Is regulatory clarity the UK's golden ticket for crypto?
THE UK has a unique opportunity to become a crypto hub – if regulation moves quickly enough.
As the European Union implements its comprehensive Markets in Crypto-Assets (MiCA) Regulation, the UK has faced mounting pressure to establish its own clear and competitive crypto regulatory framework. Therefore, in late November this year, the FCA announced its roadmap proposing full regulation of the crypto asset sector by the end of 2026, when the authorisations gateway is expected to open.
For businesses considering setting up shop outside of the EU, the UK has up until now offered less stability. Regulatory uncertainty, lengthy approval processes, and the lack of clear guidance has made the region less attractive to crypto firms seeking similar clarity to that offered by the EU’s MiCA. Now, however, it appears that there may be light at the end of the tunnel for the country’s crypto space.
In addition to the FCA’s (Financial Conduct Authority) announcement of a regulatory roadmap, in the same month the Houses of Parliament made further progress in passing the Property (Digital Assets) Bill – a significant milestone in the UK’s regulatory view of crypto with regard to taxes. The bill has not yet been passed, but prospective investors are more likely to invest in crypto with a clear understanding of how it is taxed.
In many ways, the UK government’s ambitions to lead in the digital asset space were disrupted by a change in leadership, delaying progress on a cohesive regulatory framework. Despite the Treasury publishing final proposals in late 2023, implementation had stalled. However, the recent FCA announcement means that the UK can now chase its ambitions to become a global hub for digital assets.
The people have spoken
The FCA has not chosen to create this roadmap without reason: The issue of regulation now extends well beyond being an informing factor for company business strategies. Investors and traders themselves are now highlighting regulatory clarity as a significant factor in their decision to be involved in the crypto space.
A recent survey run by Gemini polled 6,000 people in five major markets, including the UK and US. Almost 40% of UK respondents who did not own crypto cited regulatory concerns to be what is preventing them from entering the market. Similarly, around 18% of UK consumers now own crypto, showing that regulatory guidance on crypto is needed now more than ever.
The opinion of traders and investors in the crypto space are perhaps amongst the most insightful indicators of what shall ultimately move its progression. This contingent is not only motivated by short-term profits, but genuine care about the future of the industry. The same survey found that the vast majority of UK crypto owners hold it for its long-term value rather than short-term yield.
Britain’s time to shine
The EU’s MiCA regulation, which many believe will be one of the most robust regulatory frameworks for the cryptocurrency industry, offers well-defined rules for stablecoins, exchanges, and other crypto service providers.
These rules, which will come into effect over the next 18 months, provide businesses operating within the EU with much-needed consistency and clarity and a more stable operating environment, providing a more attractive environment for investment in the region.
However, change and innovation happens quickly in the crypto space, and it’s likely that by the time MiCA comes into full effect, there may already be the need for adjustments and improvements to the framework.
The UK’s FCA now has the benefit of hindsight to implement its own version of MiCA, with this in mind. With the ‘second-mover advantage’, the FCA has an opportunity to create a more future-proof framework to demonstrate that the UK is open for business with regards to the sector. It is improvements and tweaks in retrospect that the FCA will be taking into consideration with their newly announced roadmap.
The silver lining
Crypto companies seeking to operate in the UK needn’t despair any longer. With careful observation of how MiCA is received and identifying potential gaps in its implementation, the UK now has the opportunity to create a more agile, forward-thinking regulatory environment.
The UK can learn from the mistakes of others, which is a luxury seldom offered in an industry as swiftly-evolving as crypto.
For this silver lining to manifest, the regulator must move swiftly, to ensure that this advantage is not lost to any other region.
As global crypto adoption grows, the UK’s ability to provide regulatory clarity will be a key factor in determining whether it can position itself as a leader or remain overshadowed by the EU.
The clock is ticking.
Gillian Lynch, CEO, Gemini EU
