UK Snap Election Sends Crypto Industry Rushing Ahead of Labor Allies

Two nights before Prime Minister Rishi Sunak surprised the UK by calling a snap election, crypto executives were sipping wine and eating canapes on a terrace at the House of Commons, in an attempt to several months aimed at establishing stronger ties with British lawmakers and leaders.

The event was organized by US cryptocurrency exchange Coinbase Global Inc. and its advisor, former Conservative Chancellor of the Exchequer George Osborne. But despite the presence of senior figures from Britain’s two dominant political parties, the influence campaign increasingly targeted Labor, given their wide and consistent lead in the polls.

Sunak’s decision to call an election on July 4 validated this approach, but it also highlighted the sense of uncertainty hanging over crypto in the UK. Labor has not been in power since 2010, when Bitcoin was worth less than a dollar. And its leader, Keir Starmer, has remained rather silent on cryptocurrencies.

“Everyone is guessing” what Starmer intends to do on crypto regulation if Labor wins, said Laura Navaratnam, UK policy manager at the Crypto Council for Innovation. “Part of the answer here is very likely that Labor doesn’t know what it thinks yet.”

In what is arguably the most important election cycle ever for crypto, the UK and US are choosing their leaders in just four months. Since the two countries last went to the polls, the industry has weathered a steep market decline and a harsh regulatory crackdown.

But last year saw a stunning recovery, capped by the approval of exchange-traded products linked to Bitcoin and Ether on both sides of the Atlantic. In the United States, the industry is increase donations to crypto-friendly candidates to keep the momentum going. In the UK, he has focused on getting closer to Starmer and the party he leads.

The UK is Coinbase’s second-largest market, but many in the industry view the country as a laggard when it comes to crypto regulation. This is despite Sunak himself pledging in 2022, shortly before becoming Prime Minister, to make the country a key hub for the sector. Since then, the European Union (from which the United Kingdom voted in 2016 to secede) has passed sweeping crypto legislation, and rival financial centers like Hong Kong and Dubai have introduced new regulations.

In contrast, the UK relies primarily on a patchwork of crypto rules primarily enforced by the Financial Conduct Authority. Plans outlined by the Treasury in February last year call for digital assets to be regulated in the same way as traditional financial services.

The FCA is expected to publish a first version of its proposed crypto licensing regime before the end of the year, according to two people familiar with the matter. The regulator declined to comment.

Here is the UK Crypto Wishlist:

A Conservative government proposal to introduce secondary legislation around stablecoins – cryptographic tokens that are typically linked to a currency like the dollar – was not voted on before Parliament was dissolved ahead of the election. It is unclear how quickly this might reappear on the agenda under a Labor regime.

While Labor has steadily outpaced the Conservatives since Liz Truss’ tumultuous and short-lived reign as prime minister last fall, the crypto lobby is bracing for a changing of the political guard.

In October, trade group CryptoUK held its first event on the sidelines of the Annual Labor Conference in Liverpool. When Coinbase launched the Stand With Crypto lobbying program in the UK two months later, it did so in Manchester, a traditional Labor Party stronghold.

“We are concerned that if the government delays too long in putting a comprehensive regulatory package in place, we will fall far behind our competitors,” said Ian Taylor, an advisor to the CryptoUK board. A Labor victory could pave the way for “a demographic shift that hopefully people will want to engage with our sector”, he added.

Reeves, Siddiq

While Starmer appears less concerned about digital assets, crypto executives have turned their attention to Labor shadow chancellor Rachel Reeves and Ghost Town minister Tulip Siddiq. If Labor wins, it is these two men who will likely oversee efforts to rehabilitate London as a global financial center after Brexit.

Coinbase hosted a breakfast roundtable with Reeves at the World Economic Forum in January. Executives including Sriram Krishnan, UK general partner at venture capital firm Andreessen Horowitz, and John Collison, co-founder of Stripe, were also in attendance.

Andreessen Horowitz, also known by his nickname a16z, is among the largest venture capital backers of crypto startups. Stripe announced in April that it would bring back encrypted payments to its platform.

At an April event in London, Siddiq said Labor wanted to make the UK a “global hub” for tokenized securities – assets such as stocks or bonds that are represented in the form of digital tokens on blockchains. Proponents say tokenization will make financial transactions faster and more transparent.

Beyond selecting potential future leaders to court, preparing for a Labor government also means adjusting crypto’s political messaging, said ICC’s Navaratnam.

Instead of publishing white papers on crypto regulation, companies have prioritized grassroots outreach in Labor strongholds like Manchester. And instead of threatening an exodus of startups if regulations don’t ease, Navaratnam said Labor would likely be more receptive to demonstrating how digital assets can help ordinary people.

“The way we have engaged with the Conservative government has been from an essentially pro-market and pro-competition perspective,” she said. “I don’t think the same conversation will continue with a Labor government.”

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