When the UK government revealed its ambitious plan to establish the country as a “crypto hub” in April 2022, there was significant anticipation for rapid regulatory development. However, over two years later, the UK still lacks a comprehensive regulatory framework for the cryptocurrency sector. Industry leaders fear that the recent change in government will further delay the legislative process.
Industries Leading Crypto Adoption in the UK and Beyond
Various industries worldwide have been at the forefront of crypto adoption. The financial services sector is a notable leader, with several banks and investment firms integrating blockchain technology to enhance security and efficiency. The retail industry is also embracing cryptocurrencies, with an increasing number of merchants accepting digital currencies as payment.
Additionally, the tech industry is heavily invested in developing blockchain solutions, and the entertainment sector, including online gaming, gambling, and sports betting, is leveraging crypto for innovative customer experiences. Online casinos that leverage crypto are called crypto casinos, allowing players to buy in, wager, and withdraw winnings in digital currencies. In his UK BTC casino guide, crypto and gambling expert Kane Pepi explains that these sites offer an anonymous gaming experience and unique bonuses. Additionally, Pepi shares that the best crypto casinos are usually registered internationally, but that players from within the UK can still access them. As crypto adoption advances within the UK, these sites may become more widespread.
It’s clear that there are many industries worldwide adopting crypto in various ways. As the UK works to place itself as a crypto hub, businesses in the UK like online casinos and retail shops will be able to take advantage of crypto and its many benefits.
Timing and Legislative Challenges
Timing is a crucial factor. The general election has disrupted progress for both the Treasury and the Financial Conduct Authority (FCA). Konstantinos Adamos, group lead legal counsel at Revolut, highlighted that dealing with a complex and technical policy issue like this understandably takes time. He stressed the importance of the new government ensuring the UK does not fall behind the EU in establishing a regulatory framework for crypto.
Labour’s Stance on Crypto
Labour’s victory in the 4 July general election represents a significant shift in the UK’s political landscape. Although crypto was not specifically mentioned in Labour’s manifesto, the party has shown support for tokenization and a central bank digital currency. Some leaders within the industry like the Managing Director of Kreken’s UK, Bivu Das, believe that despite political changes, the crypto sector will largely continue as usual. However, Das also pointed out that while the policy framework for crypto is mostly designed, the pending legislation means time is running out for the UK.
Government Efforts and Regulatory Progress
In October of the previous year, the UK government announced plans to regulate crypto similarly to traditional assets. The FCA published a discussion paper on stablecoins in November, but the timeline for implementing these regulations remains unclear. Despite this uncertainty, the FCA has been enhancing its crypto expertise, with over 100 staff members now working in this area.
The FCA’s Stringent Approach
The FCA has maintained a stringent stance on crypto authorisations, with some firms waiting over 750 days for a decision. Data indicates that only four out of 30 crypto applications were approved in the last 12 months. This strict approach has prompted several crypto firms to exit the UK. Bybit, for instance, suspended its UK operations in October 2023, and digital asset trading platform Luno ceased certain services for UK clients around the same time.
The Road Ahead for the UK as a Crypto Hub
These obstacles make the UK’s aspiration to become a leading crypto hub increasingly challenging. The prolonged regulatory process and recent governmental changes have created a sense of urgency among industry stakeholders. The new government must act swiftly to finalise and implement a comprehensive regulatory framework that matches the EU’s pace and encourages innovation and growth within the UK’s crypto sector.