The UK wants to become a crypto asset technology centre through blockchain innovation and forward-thinking regulation, building on stablecoins and law.
According to management intelligence platform Acuiti, the UK government should make use of the advantages of blockchain technology and innovate in the regulation of crypto assets to create new procedures that can ultimately be used in traditional markets.
After announcing steps that saw stablecoins recognized as a legitimate form of payment in 2022, the then-Chancellor of the Exchequer, Rishi Sunak, stated that it was his “ambition to make the UK a global hub for crypto asset technology”.
As Prime Minister, Sunak oversaw the UK government’s publication of a consultation paper outlining its intention to base the framework governing crypto assets as much as possible on already-existing law.
This strategy is welcomed, and initiatives noted in the consultation document that suggest industry-led alternatives are supported in a new Acuiti paper titled Competitive Advantage: Charting the Path Ahead for UK Cryptoassets Regulation.
Released in collaboration with Portofino Technologies and Zodia Markets, it makes the case that the UK need to make use of its status as a second mover to design the regulations after the EU has enacted them. By doing this, the UK might provide a setting that encourages innovation in cryptocurrency assets.
Surpassing MiCA rules
Following the EU’s adoption of the Markets in Crypto-Assets Regulation (MiCA), the UK is now creating its own framework for the regulation of crypto assets. MiCA offers a thorough framework for the issuance and trade of digital assets, however it was created before the events of 2022.
This means that the UK has the advantage of considering events like FTX’s bankruptcy filing, which significantly changed the crypto scene.
The MiCA is viewed as being too rigid in some areas by some of the cryptocurrency ecosystem, including the prohibition on algorithmic stablecoins and the restrictions for businesses providing custody of cryptoassets.
Acuiti creator would Mitting stated: “The UK has the opportunity to build a regulatory framework for crypto assets that would boost economic competitiveness, encourage job growth, and foster innovation while, at the same time, protecting investor interests and creating safe and open markets.
Regulations for institutional investors should, whenever possible, closely follow current regulations. However, there are some situations where crypto assets stand out. Therefore, the UK’s regulation of crypto assets must take into account these variations while enabling the market to develop as effectively and securely as possible.
The UK’s strategy, meanwhile, also has certain dangers. The legislative framework for the custody of the majority of crypto assets will be included in Phase 2 of the government’s two-phase introduction of new regulations. Any delays in establishing a legislative framework for important market segments could allow other countries who also want to become centers for the development of crypto assets to seize the initiative.
Acuiti’s report on crypto asset regulation was based on a roundtable with regulators and a number of significant players in the UK market for crypto assets that was held in May.
