As British Economic Secretary John Glen announced plans to embrace stablecoins and make “dynamic” regulation of crypto technologies part of a broad plan to make the U.K. “a global hub — the very best place in the world to start and scale crypto-companies,” it was far from clear that the rest of the government was on board.
While Glen was telling attendees of the Innovate Finance Global Summit that the U.K. is “open for crypto business” on April 4, Bank of England Governor Andrew Bailey was telling attendees of its “Stop Scams” conference that cryptocurrencies are the front line of that battle, as well as an “opportunity for the downright criminal.”
Glen’s announcement also came three days after the Financial Conduct Authority (FCA) enforced a cutoff deadline that forced all but a handful of the companies waiting for the financial watchdog and anti-money laundering (AML) overseer to approve their registration requests to halt operations.
That marked an end to a Temporary Registration Regime for crypto-asset companies operating in the U.K. that was widely criticized as too slow, with just 33 of the 100 firms that signed up approved by the March 31 deadline to be AML and know-your-customer (KYC) compliant. More than 60 were turned down or withdrew — the latter including firms like payments firm Wirex and liquidity provider B2C2 — while only a handful were granted an extension.
Among those approved were payments firms Bottlepay, Payward and Paysafe, Fidelity Digital Assets and New York-based crypto exchange Gemini.
And on March 11, the FCA ordered all crypto ATM operators to shut down. That followed a strict advertising crackdown that ordered the removal of virtually any ad for cryptocurrencies, encompassing firms ranging from publicly traded exchanges such as Coinbase to Papa John’s International.
Embracing Stablecoins, Cryptocurrencies
Glen pitched a number of advantages the U.K. has, beginning with the strong and globally-recognized legal system he called a “huge asset… in making the U.K. an attractive hub for all things digital.” He also pointed to compact enforcement framework, saying that unlike the U.S. and EU, its “small number of regulators” can “move nimbly.”
Notably, he announced legislation creating a new regulatory framework for stablecoins that is intended to bring the generally dollar-pegged cryptocurrencies “into our payments framework, creating the conditions for stablecoin issuers and service providers to operate and grow in the U.K. [and] enable consumers to use stablecoin payment services with confidence.”
Glen added that the crypto trading market has matured to the point where the government feels comfortable enough “to look at regulating a broader set of crypto activities including trading of tokens like bitcoin.”
Another initiative will create a legislative framework for decentralized finance, or DeFi, by recognizing decentralized autonomous organizations — better known as DAOs — which are governance structures allowing DeFi projects to run without human management.
Read here: PYMNTS DeFi Series: Unpacking DeFi and DAO
Beyond that, Glen announced a number of government initiatives, such as an expansion of the FCA’s “world-leading” regulatory sandbox for innovation expanding to wrap the Bank of England into the new Financial Market Infrastructure Sandbox, and the creation of a ministerial-level industry Cryptoasset Engagement Group.
The crypto tech push is part of the U.K.’s broader plan to become the leading FinTech hub, Glen said, noting that “almost half of the FinTech unicorns in Europe are based in the U.K. … and last year, the sector attracted more investment than France, Germany, Sweden, and the Netherlands combined.”
However, there are other competitors, notably Switzerland, whose Crypto Valley, centered around Zug, was among the first jurisdictions in the world to woo crypto and blockchain firms and offer clear regulatory guidelines, beginning as early as 2014.
Singapore has also thrown its hat into the ring, with the Monetary Authority of Singapore (MAS) recently granting stablecoin issuer Paxos a license under its Payments Services Act and pulling back from a crackdown on NFTs, although an ad ban similar to the U.K.’s has thrown some cold water on that.
Also read: Is Singapore the ‘Future’ of Cryptocurrency?
In the Middle East, Dubai and the UAE’s Securities and Commodities Authority in February began issuing virtual asset service providers, or VASPs — a term for crypto businesses growing common amongst international regulators — in a bid to become a crypto hub.
And America sees itself as the global hub of crypto and blockchain due to the mass of companies and venture investment firms focusing billions on the space. While a coordinated attempt to create the industry’s long-called-for regulatory framework for crypto only began last month with President Joe Biden’s executive order on crypto ordering agencies to coordinate their activities and come up with joint legislative proposals, the discussion in Congress has long been focused more on protecting America’s lead in crypto and blockchain.
Getting Behind the Hype
As for Britain, Glen announced that the government was signaling its desire to get serious about the industry in fine crypto-hype fashion, announcing “that the chancellor has asked the Royal Mint to create a non-fungible token — an NFT — to be issued by the summer, an emblem of the forward-looking approach we are determined to take.”
He added that “all of this activity is happening against a backdrop of exciting, transformative innovation around the next evolution of the internet: Web3.”
Web3 is a broad catchall term for a privacy-focused vision of the internet. Proponents say it will use decentralized blockchain technology to free users from the clutches of big tech and give them control of their own personal data in a vastly decentralized — but somehow well-organized — next-generation version of the web.
While admitting that “no-one knows for sure yet how Web3 is going to look,” Glen said that the government has determined that “we want this country to be there, leading from the front.”