By mid-2023, the UK is expected to launch substantial new laws targeting the regulation of stablecoins along with other cryptocurrency activities such as staking, trading, and custody. Economic Secretary Bim Afolami announced at the Innovate Finance Global Summit that this legislation would officially bring various crypto operations such as exchange management and customer asset custody into the regulatory fold for the first time.
“We are now working at pace to deliver the legislation to put our final proposals for our regime in place,” Afolami stated, indicating that once activated, these rules will include a broad spectrum of crypto activities under UK regulatory oversight for the first time. This initiative follows the significant financial markets bill passed in 2023, which established the baseline for treating such assets as regulated activities.
Regulatory Landscape Shifts Ahead of Elections
The urgency of these regulatory advancements is compounded by the upcoming national elections, which might see the Conservative Party, currently in power, replaced. This political uncertainty underscores the need to establish a strong framework swiftly, as future administrations might alter the trajectory.
The government’s intent to position the UK as a premier crypto hub is clear, yet this ambition is juxtaposed against a backdrop of international movements in the crypto space that may outpace local efforts.
In the U.S., the Securities and Exchange Commission has recently greenlit a slew of bitcoin spot exchange-traded funds (ETFs), making it easier for the American public to invest in bitcoin through regulated avenues, unlike in the UK, where such options are not available.
This development has catapulted bitcoin to new heights, reaching a record price of $73,800, and significantly enhancing its perceived legitimacy.
UK investors, however, face a starkly different environment. The Financial Conduct Authority (FCA) in 2021 banned crypto-related derivatives for retail customers, citing the volatile nature and unclear valuation bases of such assets. Critics argue this restricts UK residents from participating in one of the most dynamic sectors of the investment landscape.
Regulatory Developments and Investor Sentiment
Despite these restrictions, there is some movement toward easing access. The FCA has recently allowed the listing of crypto-linked exchange-traded notes that track bitcoin and ether, albeit only for professional investors.
“With increased insight and data due to a longer period of trading history, the FCA believes exchanges and professional investors should now be able to better establish whether crypto-ETNs meet their risk appetite,” the FCA commented.
This cautious approach reflects a broader hesitation within UK financial oversight entities about fully embracing the volatile cryptocurrency market. Meanwhile, other global markets, including the EU and Hong Kong, have accelerated their crypto regulatory frameworks.
For instance, Hong Kong introduced its first two ETFs for crypto futures in December last year, and Australia saw the launch of its first spot bitcoin ETFs by Sydney-based ETF Securities in May 2022.
So, will the UK’s efforts catch up to global standards, or will it continue to lag behind, potentially missing out on becoming a leading crypto hub? Let’s see!
