Why the Government needs to commit to a regulatory regime no later than 2024
by Nick Taylor, Head of Public Policy EMEA, Luno
The closure of HM Treasury’s consultation on the future regulatory regime for cryptoassets brings the UK one step closer towards establishing comprehensive regulation. It’s a pivotal moment whereby businesses in the space have had the opportunity to shape the industry’s future and this is certainly a positive step.
The last three months of the consultation has fostered positive collaboration between the public and private sector to create an effective regulatory framework. City Minister, Andrew Griffith, has promised “clear, effective, timely regulation” that would “strengthen our position as a world leader in fintech, unlock growth and boost innovation”. The UK is moving in the right direction.
Indeed, Rishi Sunak has invested in making the UK a global science and tech superpower, with £100 million recently put into an AI taskforce. In line with the end of the consultation and the UK’s position as a world leader in FinTech, the Government has a huge opportunity to ensure crypto contributes to this initiative through effective regulation and must not let it slip.
This is a once-in-a-generation opportunity to make Britain the best – and safest – place to run a cryptoasset business, in turn benefiting and protecting the millions of British people who have invested in these assets.
Delivering on the Government’s ambition to build an effective regulatory framework will allow the sector to grow, will create jobs, and will protect consumers by making this country one of the safest places to invest in crypto. But there is still a way to go before new rules come into force.
The collapse of FTX was a key moment – at least $1bn of consumers’ money was lost, and with increasing uncertainty in financial markets, there is now real urgency for regulation.
So, what’s next for crypto regulation?
Firstly, the Government should publicly commit to fully implementing a regulatory regime no later than the end of 2024 to avoid falling behind other jurisdictions, such as the European Union with the passing of their MiCA legislation. While this isn’t standard practice for Whitehall, a target date would give the UK the best opportunity to obtain a competitive advantage and provide businesses and consumers with the protections and certainty that are so desperately needed.
Secondly, the Government should provide regulatory clarity on staking – a way to get rewarded for helping validate transactions and securing the network. Staking benefits consumers by enhancing the stability of the blockchain network and presenting a significantly lower risk of harm than lending because there is no transfer of title or custody.
Finally, I would like to see the Treasury and the FCA create a set of metrics and reporting mechanisms to allow policymakers, industry, and the public to understand the efficiency and efficacy of the new authorisation process. A degree of transparency in this regard will drive greater efficiencies and hold firms to a higher standard. This will provide a better environment for investing in crypto, by making it safer and giving people the confidence they need to turbocharge this industry.
Ministers and industry players must continue to work together beyond the consultation to ensure crypto plays its part in helping the UK become a science and tech superpower, benefitting millions of consumers and laying the foundations for future growth and investment for decades to come.