UK crypto hub ambitions at risk if it does not pass new rules quickly, experts warn
The government’s new plans to “robustly regulate” cryptoassets garnered mixed reactions from the crypto industry today, with experts saying that while the proposals were welcome there were still huge questions about the timeline for when they might come into effect.
Nick Taylor from Luno, a crypto exchange, described the launch of the consultation as “a pivotal moment”.
“Whilst there is still a way to go before new rules come into force, we’re encouraged by the scale of the government’s ambition… comprehensive regulation will drive up standards, protect consumers, and give businesses the certainty needed to invest, innovate and create jobs in the UK,” Taylor said.
Tim Byun, from OK Group, which runs the OKX exchange, agreed.
“This is a positive announcement from HMT and is an encouraging sign that the crypto industry in the UK will mature under a comprehensive regulatory framework,” Byun said.
The regulation signals “a shift from a ‘wait-and-see’ approach to a comprehensive regulatory approach that supplements [anti-money laundering] rules with financial solvency and custody rules based on recent market developments,” Byun continued.
However, other analysts were concerned about the government’s timeline, suggesting that if they failed to act quickly, the UK would risk losing out on gains from the crypto industry.
Charles Kerrigan, a partner at law firm CMS specialising in crypto, was damning on the chances of the government putting proper regulations in place quickly.
“If even getting to a consultation was this hard” he said, “it will be the devil’s own job to cross the finish line on regulation – especially as the good, the bad and the ugly will keep coming through the consultation period.”
Similarly, Zoe Wyatt from Andersen LLP said: “It will be two years before any meaningful change to the UK regulatory regime for cryptoassets and we fear that the UK’s desire to be a global crypto hub will be usurped by another faster acting jurisdiction. The UK is taking baby steps whilst the EU and US surge ahead.”
The consultation paper had a stricter tone than some of the government’s previous messaging on cryptoassets, reflecting the series of high-profile scandals which hit the crypto industry over the last year.
Corker Binning’s Nick Barnard noted this shift was “subtle but important.”
“Whereas in April 2022, Rishi Sunak’s stated goal was to make the UK a ‘global hub for cryptoassets’, the headline today is ‘ambitious plans to robustly regulate’,” he continued.
Under the draft regulations, crypto will be mostly brought into existing financial regulation. Some in the sector warned, however, that this might stifle innovation.
“While the government is keen to be seen to promote innovation, these proposals are currently weighted heavily in terms of consumer protection,” Ian Taylor, head of digital assets at KPMG, said.
“It’s clear that implementing and adhering to these proposals will require massive additional regulatory resources, or a large investment, which many crypto firms simply do not have at present. As a result, in the short term, we’re likely to see the market tighten and the overall number of firms operating in the crypto space reduce,” he continued.