On the 4th of April 2022, the UK Government announced a massive plan to make the UK the next major global crypto hub. Their plan was given by John Glen representing HM treasury, with many promising takeaways (Glen, 2022). Stablecoins are to be regulated properly to make them able to be used as normal payment in the UK, a massive tax overhaul/reassessment to increase the competitiveness of the tax system, the royal mint to create its own NFT this year, and other measures to help create a new financial market infrastructure (FMI). All of which aim to give firms and investors the ability to experiment with blockchain technology with the solid infrastructure beneath them.
This plan alone sounds assuring, but there are currently big barriers the UK is facing in terms of regulation from the Financial Conduct Authority (FCA), Similar to the US Securities and Exchange Commission (SEC).
Only 33 crypto firms have been approved in the UK, Over 80% of the firms have been rejected or have withdrawn their applications. The expected requirements firms have to meet are not being met, with the main standard being the ability for the firm to not disguise or transfer criminal funds (Browne, 2022). On top of this, the FCA has also got a massive backlog of applications due to the process currently being too slow.
This proposes major issues for how quickly the UK Government can integrate their ideas, like stable coin payments, because the FCA is struggling with regulating the bodies that provide the crypto services. The government would not use a firm that isn’t under FCA regulations. We can see this issue not only in the UK. Binance.com for example has been observed by the US, EU, and China’s overseeing bodies to be liable for money laundering and insider trading. Binance.com is the biggest crypto exchange in the world currently in terms of volume by a considerable margin (CoinMarketCap, 2022). Showing how far not only the UK has still to go in regards to properly regulating crypto firms and taking advantage of the services that they provide.
This all comes together with the chairman, Charles Randell of the FCA stating that the UK needs to be more realistic with how long it would take the regulators to prepare and supervise the crypto firms that issue the services (Oliver, 2022). This doesn’t show promise for the UK’s advancements in the industry as the FCA also suggested that independence, whilst they are currently under pressure, is needed. This Means John Glen, the man that published the UK government’s plan to make the UK the best place to scale crypto-companies may not be so certain due to the FCA’s conflict.
Many digital asset businesses have had many clashes with the FCA as they believe that they unfairly implement money-laundering controls. This has swayed businesses to move their work to the other rival crypto hubs like Switzerland and Dubai, which both are currently seen as the biggest crypto hubs due to their friendlier approach to their legislation.
Overall the UK’s new plan is extremely promising and a step in the right direction but there is still so much regulation and safety that the FCA needs to do for their ideas to be fully incorporated. If the FCA can co-operate and start bringing firms onboard, the UK could very well rival the other countries that are currently seen as strong crypto hubs.
