The United Kingdom is at a critical juncture in its approach to the rapidly evolving digital assets space. As the government seeks to establish the country as a “leading global crypto hub,” it must balance its ambitions with concrete measures and learn from international counterparts. According to Azariah Nukajam, head of regulation and conformity at Gemini, the UK’s hesitation in providing clear regulatory guidance bears significant costs for a sector as dynamic as crypto and decentralized finance (DeFi).
Courageous Ambitions and Slow Delivery
The Financial Conduct Authority (FCA), the UK’s financial services regulator, and the British government must work in tandem to support the growth of the industry while ensuring adherence to rules. The government is responsible for determining the legal framework, while the FCA implements and enforces these rules, providing guidance and timelines for compliance. Clear and progressive legislation is essential for a healthy market, as exemplified by the former US administration’s approach of “regulations through enforcement,” which lacked defined rules and clear agency jurisdiction.
The British government recently proposed a draft law for a future-oriented framework to regulate crypto assets, aiming to create a crypto-friendly environment within the UK. Although this is a crucial milestone for the British digital asset sector, it is only a modest step forward due to the slow pace of reform. Ongoing discussions between industry participants highlight the need for clarity on the UK’s stance, and in August, the FCA opened access to retail for crypto exchange-traded notes. However, crypto exchange-traded funds (ETFs) remain prohibited, and concerns about the lack of definition of regulatory limits for DeFi, a rapidly growing segment of the industry, persist.
A Committed Regulator
In contrast to the government’s reactive approach, the FCA has demonstrated a more structured and committed approach to the British crypto sector. By hosting roundtables, engaging with the industry, and adopting a gradual approach to regulatory development, the FCA has shown its willingness to work with crypto companies to prevent market abuse and protect consumers while promoting competitiveness. The FCA’s crypto roadmap and detailed guidelines for effective implementation of specific rules, including consumer protection and market integrity, are crucial in an industry that values transparency and predictability.
However, the challenge lies in ensuring that the FCA’s rules are proportionate, as large companies may be able to absorb heavy compliance loads, while smaller startups may struggle to fulfill these requirements, potentially preventing them from operating in the UK. According to a recent survey, 40% of British crypto users report blocked payments, with an increase in “anti-consumer” practices, highlighting the need for a balanced approach that prioritizes consumer protection and innovation.
A Path to Crypto Leadership
The good news is that it’s not too late for the UK to change course. Other jurisdictions, such as the EU and Singapore, have already made more decisive moves in regulating crypto. The EU’s Markets in Crypto-Assets regulatory framework offers companies clear and comprehensive rules, while the Monetary Authority of Singapore has introduced a strict licensing process, regulatory sandboxes, and pilot schemes. Although being a second mover allows the UK to learn from others’ experiences, it also risks being left behind if it fails to address industry concerns promptly.
By building on the FCA’s promising foundation and strengthening coordination with the government, the UK can create a fertile ground for becoming a leader in the global crypto economy. As Azariah Nukajam emphasizes, the UK must match its ambitions with concrete measures to provide regulatory clarity, support innovation, and protect consumers. This approach will enable the UK to reap the benefits of being a global crypto hub, attracting capital, talent, and innovation, and solidifying its position in the modern global economy.
Read the original article at https://cointelegraph.com/news/uk-regulatory-clarity-that-matches-ambition?utm_source=rss_feed&utm_medium=rss_tag_regulation&utm_campaign=rss_partner_inbound
