While UK laws guiding fintech record successes, laws put in place to regulate crypto are rapidly going south. The Precautions put in place by Britain to regulate crypto in the UK appears to have caused more harm than good for the industry.
Crypto’s bad actor characteristics forced British authorities to put serious warning measures in place. The warnings were supposed to protect users investing in crypto while keeping tabs on the different crypto companies. However, the reverse has been the case in the crypto industry as it has been misinterpreted generally to mean that the UK is not accommodating to crypto.
Countries Continue to Flee Amid Rigid Regulations
The rigid laws have caused companies to move their market to more accommodating countries. The UK records just 34 firms registered under the laws enacted by the FCA. The other companies that failed to meet registration standards have sought sanctuary elsewhere. Top companies would rather have most of their business outside the borders of the UK where they believe they can thrive; a far cry from the UK’s goal of promoting crypto.
The consumer awareness spearheaded by the Bank of England in collaboration with the Financial Conduct Authority appears justifiable. As of 2020, there was minimal research done to thoroughly assess crypto’s makeup and its full potential in the financial market. This is coupled with the fact that the prices of tokens witnessed a dramatic hike in the market.
In a bid to protect investors and eliminate huge risks, the FCA asked that all crypto companies be registered while adhering to the direct anti-money laundering laws. The fall in the UK crypto market is evident in Pitchbook’s data analysis. Here, there is a decline in VC by 70% in the first quarter of 2022 as opposed to a rise in global deals.
As a counteraction to amending the laws, the treasury has proposed to put in place clearer and better-accommodating policies that would minimize the blow. The treasury understands that accepting and facilitating digital assets is highly essential for its finances. Hence;
- Crypto firms will be allowed to accumulate funds from consumers but they must be secured by banks that are fully licensed
- An independent governing body is to supervise crypto assets
- The FCA is to draft a new set of rules for digital tokens (also known as stable coins) that are not linked to the value of fiat currency
- All digital tokens associated with fiat currency would be encompassed under former e-money laws
- The Royal Mint will issue NFT (non-fungible token)
Fintech experts expressed the fear that soon if crypto firms remain overseas in countries like the USA and Switzerland, regulating them in the UK would be less feasible. There have been popular opinions by crypto firm owners that fintech and the crypto industry are interrelated. Hence, it would be wise to borrow fintech’s regulating system to effectively monitor the crypto industry.
What is Next?
Rather than combat crypto, the new directive to be adopted by UK crypto regulators is a deliberate effort to make laws that can be obeyed. This will ultimately improve the UK financial market once these crypto companies return to their root.