The UK is set to introduce new laws in the middle of 2023 to regulate stablecoins and other cryptocurrency activities. Economic Secretary Bim Afolami announced at the Innovate Finance Global Summit that this legislation would bring various crypto operations, including exchange management and customer asset custody, under regulatory oversight for the first time. The aim is to establish a strong framework quickly in light of the upcoming national elections, which could result in a change of government and potential alterations to the regulatory trajectory.
The UK government’s intention to position the country as a leading crypto hub is clear, but it faces competition from international developments in the crypto space. In contrast to the UK, the US 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 channels. This has boosted bitcoin’s legitimacy and pushed its price to record levels.
However, UK investors face a different environment. The Financial Conduct Authority (FCA) banned crypto-related derivatives for retail customers in 2021, citing the volatility and uncertain valuation of such assets. Critics argue that this restricts UK residents from participating in a dynamic sector of the investment landscape. Despite these restrictions, the FCA has allowed the listing of crypto-linked exchange-traded notes for professional investors, reflecting a cautious approach to the volatile crypto market.
While the UK lags behind in its regulatory efforts, 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 last year, and Australia launched its first spot bitcoin ETFs in May 2022.
The question remains whether the UK can catch up to global standards and become a leading crypto hub or if it will continue to lag behind. Only time will tell.
