Regulation
UK cryptocurrency industry nervously looks ahead as voters set to oust Tories in favour of Labour – DL News
- Cryptocurrencies may not be a priority in a Labour government.
- That might not be a bad thing, some experts say.
- The fate of the UK crypto sector depends on many factors.
As British voters head to the polls on Thursday to elect a new Parliament, cryptocurrency investors are bracing for change.
After 14 years in opposition, Labour is widely expected to turn a 20-point lead into a landslide victory over the Conservatives at the polls.
Some in the UK’s thriving cryptocurrency industry fear a change of government.
“Labour will have a lot to do and prove, and I fear crypto will not be a priority,” said Marco Morazzoni, founder of Semoto, a London-based blockchain service provider.
“What the industry needs right now is not for politicians to ignore us,” he said. DL News“We need clarity.”
Comprehensive legislation
Regulatory clarification was expected this summer.
The UK government was set to propose more comprehensive legislation for the cryptocurrency sector, covering rules for issuing, exchanging, investing, custody, lending and staking cryptocurrencies.
But Prime Minister Rishi Sunak’s decision to call a snap election on July 4 has thrown a spanner in the works.
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The initial plan would have made the UK the second major jurisdiction, after the European Union, to implement a bespoke crypto regime.
“The UK’s regulatory approach to the sector, once ahead of the curve, has failed to keep pace with other parts of the world,” said Jordan Wain, Chainanalysis’s UK head of public policy.
Lack of prioritization
The Labour Party led by Keir Starmer has not included digital assets in its manifesto or policy plan.
But industry insiders caution against reading too much into this omission.
“This lack of prioritization is not necessarily bad for the industry,” Wain said.
“I am heartened that Labour’s financial services plan expresses support for the UK’s work on a central bank digital currency and the approach to tokenisation of securities,” Wain told DL News.
Rachel Reeves, the expected new Chancellor of the Exchequer, said in Labour’s plan for financial services In January, the party would embrace innovation, including tokenization of securities and the digital pound.
And the work done by the Conservative government on cryptocurrency legislation will not be in vain.
“The Labor Party will inherit a legacy of detailed and thorough policy and legislative work,” Wain said.
Delays
A change of government means that plan will face some delays, but experts expect the direction of travel to remain the same.
Labour and the Conservatives agree that the digital asset sector should be regulated, Wain said.
“This project should continue to receive support regardless of which party is elected to 10 Downing Street this week,” he said. “The only question is when.”
Under the Conservatives, the Financial Conduct Authority recorded 47 crypto asset service providers, including major market makers like Wintermute and GSR.
“Banks in the UK have put in place significant restrictions on offering accounts to cryptocurrency businesses.”
— Usman Ahmad, Zodia Markets
London also celebrated the arrival of Andreessen Horowitz, the American venture capital firm that invests in crypto.
London-headquartered investment platform eToro is the largest venture-backed cryptocurrency company to date, according to Pitchbook, having raised a total of $1.6 billion.
In the first half of 2024, the UK saw $600 million in venture capital investment in the crypto sector, according to data from Pitchbook.
Beyond government
The pace of legislation has also been set by agencies like the FCA, not just the government.
The FCA, for example, introduced rules on financial promotions in 2022, which many players in the sector have struggled to comply with.
And ultimately, the success of a crypto sector goes beyond government policies.
The UK’s robust financial sector also needs to embrace the emergence of the cryptocurrency industry. For example, cryptocurrency companies have long struggled to open bank accounts with major UK banks.
“The government has been vocal in trying to support the industry and grow it,” said Usman Ahmad, CEO and co-founder of Zodia Markets. DL News.
“Yet virtually all UK banks have imposed significant restrictions on offering bank accounts to cryptocurrency businesses.”
Although the government has put in place a more innovation-friendly program, banks are not obliged to follow its example.
“This is a short-sighted approach as the sector has many well-capitalized and established companies that can add value to the ecosystem,” he said.
“But they need basic business services, including banking services to pay their staff and bills.”
Inbar Preiss is a regulatory correspondent at New DL. Email the author at inbar@dlnews.com.