Enforcement and adoption: What does the UK's recent regulatory target for cryptocurrencies mean?

Enforcement and adoption: What does the UK’s recent regulatory target for cryptocurrencies mean? – Mail Bonus

In April, the British Ministry of Economy, also known as Her Majesty’s Ministry of Finance, announced that it intended to put the UK at the forefront of technology by bringing stablecoins under the country’s payment regulation – a bold move that seems particularly interesting in contrast to the recent TerraUSD shutdown. (UST).

Later in May, at the Queen’s annual speech, Prince Charles briefed Parliament on two bills that would support “the safe adoption of cryptocurrencies” and “create the power to seize and recover cryptocurrencies faster and easier.”

Taken together, these actions reflect the nation’s growing interest in digital assets, which is not surprising given the inevitable competition for innovation with the European Union.

The last few months have been busy with cryptocurrencies in the UK. In addition to some important precedents such as the Supreme Court’s decision to recognize NFTs as the property or listing of the first European ETF Grayscale on the London Stock Exchange, we witnessed several major regulatory announcements.

Treasury issues with stablecoins

In its announcement on April 4, after months of public consultation, the Treasury acknowledged that certain stablecoins could become a “comprehensive means of payment” for retail customers. It also declared its readiness to “take the necessary legislative action” to bring stablecoins into an understandable regulatory framework.

As Koinly’s chief tax officer Tony Dhanjal explained to the Cointelegraph, this announcement should be seen as huge news or even variability because it will lead to a reclassification of stablecoins in the UK:

“When stablecoins are no longer subject to capital gains tax, cryptocurrency spending could become much more widespread and we could see the introduction of cryptocurrency as a means of payment in mainstream industries.”

The intentions declared by the Treasury were not limited to stablecoins; The Financial Supervisory Authority also struggled to launch the Cryptoasset Engagement Group, which will consult with industry stakeholders; re-evaluate the country’s tax system in terms of cryptocurrency, establish a “sandbox of financial market infrastructure” and even its own NFT Royal Mint.

Even the infamous collapse of the market in the second week of May, especially painful for the initial promise of zero-level stablecoins, did not deter the Treasury. According to the Independent, legislation to make stablecoins a means of payment would be included in a bill on financial services and markets.

What is known now is that the Treasury does not intend to include stablecoins algorithms, such as UST, in this legislation – only fully supported stablecoins such as Tether (USDT) or USD Coin (USDC) are under consideration.

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Grab and recover

The aforementioned bill on financial services and markets, which could potentially include guidelines for stablecoins, took place as part of the Queen’s speech – a package of 38 legislative proposals presented to Congress on 10 May.

In the current picture, it does not say much, although the language sounds rather benevolent to the article. The bill aims to “seize the opportunities of innovative technologies in financial services,” including:

“Support for secure adoption of cryptocurrencies and resilient outsourcing to technology providers.”

For now, a key element in the bill’s announcement is the intention to create a national framework that would not mimic the EU. Although this would initially apply to the traditional financial sector, similar cryptocurrencies are expected.

East End of Government Offices Great George St, where Her Majesty’s treasure is located. Source: Carlos Delgado

Another part of the Queen’s speech that is significant for the cryptocurrency industry is the bill on economic crime and corporate transparency. At first glance, it does not sound as friendly with digital currencies as referring to the list of risk areas where the British regulators intend to tighten their grip. As the only line that mentions cryptography goes, the bill would create the authority to:

Speed ​​up and recover cryptocurrencies faster and easier, which is the primary medium used for solution software.

Although the “mainstay of solution software” is not a straightforward wording, the existence of an institution that could not only seize, but also recover funds in cryptography, would strengthen the market.

“A big step for Britain”

Public perception in the UK’s cryptocurrency community is positive, Djahal said. It is still a common belief that cryptography is a criminal paradise and that is why the regulation is welcome, he believes:

“It is not that the current power cannot seize the solution software money, but anti-money laundering legislation passed in 2002 before the introduction of cryptocurrencies may just not be appropriate for the purpose of the cryptocurrency world.

Benjamin Whitby, Qredo’s head of oversight, tends to agree on that. He told the Cointelegraph:

“I think the recognition of the space in this proposal is extremely positive, recognizing the asset class will open up opportunities for more fintech companies to start working on cryptographic assets in their technology table.”

While the ambition to develop effective enforcement might still be considered somewhat ambiguous at this point, analysts are excited about the announced stablecoin recognition. Whitby called it a “big step for Britain”, but said we should not make fun of the fact that “everything will go smoothly:”

“There are vital people who have a position they can move to for security, with organized stablecoins we can move into the T0 settlement world and reduce the strain on crunchy and fragile traditional infrastructure.

Dhanjal believes that the British financial authorities could even look for their own stablecoin, which would more or less resemble the digital currency of the central bank (CBDC) – the state-funded “Britcoin” that will be linked to the British pound. The intention here is to maintain financial stability and deal with the fluctuations inherent in cryptocurrency, he says:

“With the right regulation, Britcoin could provide more efficient payment methods and expand consumer choice, especially in an increasingly diversified financial system.”

Will the UK be great again?

It’s hard not to compare the UK with its mainland neighbors now that they are separated and have to compete with each other for talent and innovation. The very spirit of the Queen’s speech is based on the comparison, which states her role in “making the most of our Brexit freedom” or “seizing the benefits of Brexit” – in total the word “Brexit” is mentioned 20 times. The UK could and would innovate and adopt faster than many jurisdictions, Whitby believes, and moving away from the EU regulatory process would allow it to act faster:

“Cryptocurrencies allow for faster settlement, remove credit risk and reduce settlement time to almost zero, it is a great victory for business and the UK has set its sights on taking the lead. The UK has a long history of exploring borders, crossing seas in tiny ships, securing risks and creating new projects – cryptography is no different.

Dhanjal is confident that the UK has a great opportunity to compete beyond its mainland neighbors, as it has a centuries-old heritage in financial services, a deep talent pool and experience from around the world from the financial sector and start-ups. In his opinion, the UK is not ready to adopt the general spirit of EU regulations and that is good news for the country.

“Now that the shackles of the EU have been removed through Brexit, Britain can rush through the zone to become a leader in cryptocurrency innovation and adoption,” he said.

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Gilbert Hill, head of policy at Poolchain’s blockchain-based data collection platform, told the Cointelegraph that the British authorities are genuine in their efforts to create a safe haven to set up and expand cryptocurrencies, but that not all of them are effective.

In particular, he considers the current regulatory sandbox inflexible, saying he has rejected two-thirds of applicants, which has already led to some of the best projects being emptied to mainland Europe. Hill also emphasized the strengths of the European approach:

“In a nutshell, the EU is putting data reform at the heart of its policy with the goal of tearing down 300 billion euros a year, and enacting new legislation covering everything from artificial intelligence to gatekeepers and data organizations, everything. a new source of high quality information to build better Web3 products.

To become a future leader, Hill said, Britain needed as much political will “as seen on the mainland” and to get rid of the inflexible FCA / sandbox model. Hopefully, the spirit of competition and the urge to justify its separation from the continent will help the nation make the right decisions.