by Thomas Tudehope, Global Head of Policy at Luno
While much of recent focus has been on the machinations at the top of the Conservative party, there has been a very important step towards effective regulation of cryptocurrency in the UK.
Crypto is an increasingly significant sector, attracting millions of pounds in investment and creating tens of thousands of jobs – while nearly 20% of UK adults hold some cryptocurrency.
Just last week the UK was named the biggest crypto economy in Europe, accounting for $233 billion in raw transaction value from July 2021 to June 2022.
The Government amendments to the Financial Services and Markets Bill – passed in the Commons yesterday before heading to the House of Lords – will allow for the introduction of a full comprehensive regulatory regime for crypto. City Minister Andrew Griffith has moved at pace upon taking office, and his action has been widely welcomed by the industry as it signals a move away from the piecemeal approach to regulation.
While this is the very start of the process, the UK is now in a position to grasp the opportunities that crypto presents and catch up on the advances already made in this area in the EU through MiCA.
As the former Chancellor, and now Prime Minister, Rishi Sunak said “regulating effectively” will give crypto firms “the confidence they need to think and invest long-term” and ensure that “the businesses of tomorrow – and the jobs they create – [are] here in the UK”.
These amendments- will give policymakers the ability to introduce a regulatory regime for crypto if they want to under the Designated Activities Regime. It is not the regulatory framework itself.
Over the coming months, we look forward to working closely with policymakers as they start shaping the specific rules and regulations.
There are lots of international precedents that officials could look to as they begin this process. Singapore, where Luno has a full crypto licence, introduced its regime in 2019, while the EU’s MiCA regulation is about to be passed by Brussels.
From Luno’s experience of operating across 40 countries, we’ve found that the best regimes place consumer protections at their core. It is also important that all types of ‘crypto asset service provider’ (CASP) are within scope, rather than focusing on just one part of the sector.
These tough regulatory regimes and innovation are not mutually exclusive. Consumer protection is a prerequisite for trust, which is necessary for widespread adoption, which in turn is a prerequisite for commercial success and innovation.
Aside from strong, bank-like, consumer protection requirements, we would urge policymakers include a full suite of conduct and governance rules to ensure that CASPs are well managed. There also need to be standards set for outsourcing, cybersecurity and data protection.
With the UK firmly rooted as a world leading fintech hub and crypto adoption continuing to rise, it’s the right time for the government to take action on crypto regulation. Consumers need to be protected and businesses require certainty.
These amendments are a great step in the right direction. A holistic regulatory framework will unleash innovation in the sector, help to create thousands more highly-skilled jobs, and attract significant investment into the UK.