The UK is set to introduce new legislation in the middle of 2023 to regulate stablecoins and other cryptocurrency activities. Economic Secretary Bim Afolami made the announcement at the Innovate Finance Global Summit, stating that the new laws would bring various crypto operations under regulatory oversight for the first time. This move follows the passing of a financial markets bill in 2023, which laid the groundwork for treating these assets as regulated activities.
The urgency to implement these regulations is heightened by the upcoming national elections, which could result in a change of government. This political uncertainty underscores the need to establish a robust framework quickly, as future administrations may alter the trajectory.
The UK government’s ambition to position the country as a leading crypto hub is evident. However, this aspiration is contrasted by international developments in the crypto space that may outpace local efforts. In the US, the Securities and Exchange Commission has recently approved several bitcoin spot exchange-traded funds (ETFs), making it easier for Americans to invest in bitcoin through regulated avenues. In contrast, such options are not available in the UK.
This development has propelled bitcoin to new heights, reaching a record price of $73,800 and enhancing its perceived legitimacy. UK investors, on the other hand, face a different environment. The Financial Conduct Authority (FCA) banned crypto-related derivatives for retail customers in 2021, citing the volatile nature and unclear valuation bases of these assets. Critics argue that this restricts UK residents from participating in one of the most dynamic sectors of the investment landscape.
Despite these restrictions, there have been some steps towards easing access. The FCA has recently permitted the listing of crypto-linked exchange-traded notes that track bitcoin and ether, but only for professional investors. The FCA commented that with more insight and data from a longer trading history, exchanges and professional investors should be able to assess whether crypto-ETNs meet their risk appetite.
This cautious approach reflects a broader hesitation among UK financial oversight entities to fully embrace the volatile cryptocurrency market. Meanwhile, other global markets, such as the EU and Hong Kong, have accelerated their crypto regulatory frameworks. Hong Kong introduced its first two ETFs for crypto futures in December of last year, and Australia saw the launch of its first spot bitcoin ETFs in May 2022.
So, the question remains: will the UK’s efforts catch up to global standards, or will it continue to lag behind and potentially miss out on becoming a leading crypto hub? Only time will tell.
