UK to Spell Out Crypto Plans as Startups Eye US Trump Benefits
(Bloomberg) -- The British government will seek to combat the lure of a Donald Trump-led US to the cryptocurrency industry by setting out its plans to regulate the sector this month, an effort to reassure firms about their UK prospects.
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The Treasury is planning two pieces of legislation on stablecoins — tokens tied to the value of a less volatile asset such as the US dollar — and a carve-out sought by crypto providers to exclude so-called staking services from current financial regulation, people familiar with the matter said.
The decision to move ahead on regulating crypto comes as Trump’s election victory, which was celebrated by the industry, turbo-charges assets including Bitcoin. The risk for the UK is that startups look to other jurisdictions such as the US where rules are more clear or favorable.
Trump has promised to make the US the global crypto capital, fire US Securities and Exchange Commission Chair Gary Gensler, create a government-owned Bitcoin reserve and ensure all future Bitcoin is mined on US soil.
UK legislation was expected to be passed by former premier Rishi Sunak’s Conservative government over the summer, as part of his 2022 pledge to attract digital-asset businesses and make the UK a global crypto hub. But Sunak’s decision to call a general election in July, which the Tories lost, delayed the schedule and Keir Starmer’s Labour administration put the plan on ice.
Legislation on stablecoins will pave the way for the Financial Conduct Authority to consult industry on rules. Staking, where investors lock up their tokens to help keep a blockchain operating in return for a small yield, is expected to receive a new classification that avoids being considered a collective investment scheme with the additional scrutiny that incurs.
The industry sees staking as the provision of tech services, rather than the direct management of assets that classification as a collective investment scheme would imply.
New Rules
A Treasury spokesperson declined to comment. The FCA plans to publish a roadmap for its plans to regulate the cryptocurrency sector “shortly,” a spokesperson for the regulator told Bloomberg.
The roadmap is likely to include a timeline for the FCA to publish a consultation paper on stablecoins early next year, two people familiar with the matter said, followed by a phased approach to its regulation of other areas in crypto.
The government will also update the industry on progress made in the digital securities sandbox, a live environment for blockchain experimentation jointly run by the FCA and the Bank of England, the people said.
The lack of movement on UK legislation has made crypto companies wary of dedicating resources to the UK, executives and lobby groups told Bloomberg, particularly as the European Union’s wide-ranging Markets in Cryptoassets regulation is set to be fully implemented by the end of the year.
“The UK has a real opportunity to capitalize on a second-mover advantage, but only if it can mobilize,” said Laura Navaratnam, UK policy lead at industry body Crypto Council for Innovation. “We are a little bit further than even the Treasury and the regulators would’ve ideally wanted.”
The UK Treasury said last year it would provide more clarity on specific areas of crypto by some point in 2024. That commitment followed an earlier government consultation on fiat-backed stablecoins as well as the passing of the wider Financial Services and Markets Act in June 2023.
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