The UK has just welcomed its most crypto-friendly leader ever in Rishi Sunak, who has just been named as Prime Minister, replacing Liz Truss who resigned after just 44 days in office last week.
It was the markets’ reaction to Liz Truss’s disastrous mini-budget that forced her to quit. The pound hit historic lows against the dollar, gilt yields jumped, and stock markets fell. The mortgage market, the pension market, the housing market, amongst others, all took a battering.
Sunak is seen as having a safer pair of hands than his predecessor, with his constant warnings about the disastrous consequences of Liz Truss’s economic policies being proven correct.
However, I expect the current relief rally of the markets that we’ve seen since his ‘coronation’ by the Conservative party will be over sooner rather than later because the UK still faces a storm of economic problems.
There’s the brewing deep and painful recession, soaring energy prices, inflation running at more than 10%, labour gaps, ongoing supply chain dramas, and the Bank of England intent on hiking interest rates.
Against this backdrop – and because many in his own party and in the country blame him for Boris Johnson’s departure which led to Truss’s premiership – he might find it hard to find unity and push ahead with the fiscally cautious agenda he seeks and that markets crave.
However, despite the gloom, crypto investors are going to be cheered by the arrival of Sunak at Number 10.
During his time as Chancellor, he announced he wanted to turn the UK into a global crypto hub. At a speech he said: “If there is one message I want you to leave here today with, it is that the UK is open for business — open for crypto businesses… We see enormous potential in crypto… and we want to give ourselves every chance to take maximum advantage.”
He added: “There’s a genuine opportunity to build on our strengths in fintech, seize the capitalist energy which has already made UK financial services what it is… and use it to unleash the potential of crypto-technologies.”
He was influential in bringing in the Financial Services and Markets Bill, which could give regulators broad power over the crypto industry.
Indeed, in that same speech, Sunak’s pro-crypto regulation stance was clear.
“We aren’t going to lower our standards, but we are going to maintain our technologically neutral approach. Having robust and effective regulation won’t hinder innovation, it’ll actually boost it — by giving people and businesses the confidence they need to think and invest for the long-term.”
This is an approach I have long held.
Greater regulatory scrutiny must be supported as digital currencies, such as Bitcoin and Ether, are set to play an ever-greater role in the international financial system.
Such regulation will help protect investors, tackle cryptocurrency criminality, and reduce the potential possibility of disrupting global financial stability, as well as offering a potential long-term economic boost to those countries which introduce it.
I have frequently stated that one of the best ways to address the regulatory issues is via the exchanges. Nearly all foreign exchange transactions go through banks or currency houses, and this is what needs to happen with cryptocurrencies.
When flows run through regulated exchanges, it will be much easier to tackle potential wrongdoing, such as money laundering, and make sure tax is paid.
Cryptocurrencies in some form or another are here to stay – and the market is only set to grow.
There can be no doubt that regulation of the crypto ecosystem is required – and Sunak wholeheartedly has gone on record supporting this view.
Despite ongoing chaos in the UK, a crypto-friendly Prime Minister is one reason to be cheerful.