In April, the UK’s Chancellor of the Exchequer, also known as Her Majesty’s Treasury, announced its intention to put the UK at the forefront of technology by bringing stablecoins into the country’s payments regulation, a move bold that looks especially intriguing in in contrast to the recent commotioncaused by the separation of TerraUSD (UST).
Later in May, during the queen’s annual speech, Prince Charles reported to Parliament on two bills that will support “the safe adoption of cryptocurrencies” and “create powers to more quickly and easily seize and recover crypto assets.”
Taken together, these initiatives give an impression of the nation’s growing interest in digital assets, which is hardly surprising, given the inevitable competition for innovation with the European Union.
The last few months have been busy with cryptocurrencies in Britain. In addition to some important precedent sitting, such as the High Court decision to recognize non-fungible tokens (NFT) as owned or listed by Grayscale’s first European ETF On the London Stock Exchange, we saw some big announcements from regulators.
The Treasury affair with stablecoins
In its announcement on April 4, after a public consultation of several months, Treasury recognized that certain stablecoins could become “a pervasive means of payment” for retail customers. He also stated his readiness to “take the necessary legislative steps” to bring stablecoins into an understandable regulatory framework.
As Koinly tax chief Tony Dhanjal explained to Cointelegraph, this announcement should be seen as big news or even a game changer because it will lead to the reclassification of stablecoins in the UK:
“Once stablecoins are no longer subject to capital gains tax, cryptocurrency spending could become much more widespread and we could see the adoption of cryptocurrencies as a means of payment in major industries.”
the intentions voiced by the Treasury were not just limited to stablecoins; the financial regulator has also teased the launch of a Cryptoasset Engagement Group, which will consult with industry stakeholders; reassessing the country’s tax system regarding cryptocurrencies, establishing a “financial market infrastructure sandbox” and even the Royal Mint’s own NFT.
even the infamous market crash in the second week of May, particularly painful for the original promise of zero volatility for stablecoins, did not discourage the Treasury. According to The Independent, legislation to make stablecoins a means of payment would be included in the Financial Services and Markets Bill.
What is known now is that the Treasury does not plan to include algorithmic stablecoins, such as UST, in this legislation, only fully backed stablecoins such as Tether (USDT) or currency USD (USDC) are being considered.
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seize and recover
The aforementioned Financial Services and Markets Bill, which would possibly include guidelines for stablecoins, was produced as part of the Queen’s Speech, a package of 38 pieces of legislation that was announced to Parliament on May 10.
In its current form, it doesn’t say much, though the language itself sounds pretty benevolent to the industry. The bill aims to “seize the opportunities of innovative technologies in financial services”, including:
“Support secure cryptocurrency adoption and resilient outsourcing to technology providers.”
For now, the key point of the announcement of the bill is the intention to elaborate a national framework that does not copy the one of the EU. While it would initially apply to the traditional financial sector, similar requirements are expected for crypto assets.
Another part of the Queen’s Speech that bodes importantly for the cryptocurrency industry is the Economic Crimes and Corporate Transparency Bill. At first glance, he doesn’t seem so friendly to digital currencies, referring to them in a list of risk zones where British enforcers are going to tighten their grip. As the only line mentioning crypto says, the bill would create powers to:
“Seize and recover crypto assets more quickly and easily, which are the primary medium used for ransomware.”
While the “primary medium for ransomware” is not exactly benevolent wording, the existence of a body that could not only seize but also recover funds in crypto would boost the market.
“A big step for the UK”
The general sentiment in the UK crypto community is positive, Djahal said. There is still a common belief that cryptocurrencies are a haven for criminals, so regulation is welcome, he believes:
“It’s not that the powers that be can’t seize ransomware money, but the anti-money laundering legislation enacted in 2002 long before cryptocurrencies were introduced, may not be right for the cryptoverse.”
Benjamin Whitby, Qredo’s head of regulatory affairs, tends to agree on that point. He told Cointelegraph:
“I think the recognition of the space in this proposal is very positive, recognizing the asset class will unlock the opportunity for more fintech companies to start working with crypto assets in their tech stack.”
While the ambition to develop an effective app can still be perceived as somewhat ambivalent at this point, experts are excited about the announced recognition of the stablecoin. Whitby called it “a big step for the UK” but said we shouldn’t kid ourselves that “everything will be smooth sailing”.
“It is vital that people have a position they can safely move into, with regulated stablecoins we can move into a world of T0 settlements and reduce the burden on fragile and unstable traditional infrastructures.”
Dhanjal believes that the British financial authorities could even pursue their own stablecoin, which would look a lot like a central bank digital currency (CBDC): A government-backed “Britcoin” that will be pegged to the Great British Pound. The intention here is to maintain financial stability and address the volatility inherent in cryptocurrencies, it states:
“With proper regulation, a Britcoin could provide a more efficient means of payment and expand consumer choice, particularly in the emerging decentralized financial system.”
Make Britain Great Again?
It’s hard not to compare the UK to its mainland neighbor now that they’re apart and have to compete with each other for talent and innovation. The very spirit of the Queen’s Speech is based on that comparison, declaring her mission to “make the most of our Brexit freedoms” or “reap the benefits of Brexit”; In general, the word “Brexit” is mentioned 20 times. The UK could, and would, innovate and adopt faster than many jurisdictions, Whitby believes, and moving away from the EU regulatory process allows it to act faster:
“Crypto assets unlock faster settlement, eliminate credit risk and cut settlement times to almost zero, it’s a huge win for trade and the UK intends to take the lead. The UK has a long history of exploring frontiers, crossing oceans in small boats, underwriting risks and forming new businesses – cryptocurrencies are no different.”
Dhanjal is confident that the UK has a strong chance of outperforming its continental neighbours, having a centuries-old heritage in financial services, a large pool of talent and experience from around the world in the financial sector and start-ups. In his opinion, the UK is not ready to adopt the general spirit of the EU regulations and that is good news for the country.
“Now that the shackles of the EU have been removed through Brexit, the UK can accelerate through the gears to become a world leader in crypto innovation and adoption,” he said.
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Gilbert Hill, the chief strategy officer of blockchain-based data aggregation platform Pool, told Cointelegraph that the UK authorities are genuine in their efforts to create a haven for starting and scaling crypto businesses, but, in their opinion, not all are efficient.
In particular, he finds the current regulatory sandbox inflexible and said it has rejected two-thirds of applicants, which has already resulted in some of the best projects fleeing to the European continent. Hill also emphasized the strengths of the European approach:
“Simply put, the EU is putting data reform at the heart of its strategy with a goal of breaking silos worth €300bn a year, and a set of new laws covering everything from AI to gatekeepers. of the Internet and data unions, a whole new source of high quality information to create better Web3 products”.
To become a future leader, Hill said, the UK needs the same degree of political will “that is on show on the continent” and break free from the inflexible FCA/sandbox model. Hopefully, the spirit of competition and the drive to justify its separation from the mainland will help the nation make the right decisions.