The UK government has laid out plans to become a “global hub” for the crypto industry, proposing new regulations for stablecoins, a Royal Mint NFT and a suite of other measures to court digital asset companies.
The speech marked the most emphatic message from the government so far in support of cryptocurrency businesses setting up shop in Britain, after criticism from the industry that the UK’s stringent regulatory approach and indifference from the government was throttling innovation.
City Minister, John Glen, said in his speech that the government would study the possibility of issuing government debt using distributed ledger technology. Glen said chancellor Rishi Sunak had commissioned the Royal Mint to issue a digital collectible, known as a non-fungible token (NFT), by the summer as “an emblem of the forward looking approach we are determined to take”.
Financial authorities have had to weigh the potential for crypto tokens to be used for illicit activities against its potential to offer innovative solutions for everything from asset trading to corporate governance. The moves on crypto policy follow clashes between the industry and the FCA around its licensing regime for money laundering controls, which many in the industry have said was pushing firms engaged in such activities to move overseas.
The UK Treasury also released long-awaited plans to regulate issuers of stablecoins – crypto tokens intended to mirror the value of other assets such as US dollars. One of the Treasury’s proposals is to adapt existing laws that govern electronic money, such as funds stored on mobile phone apps, to cover stablecoins, bringing them under the remit of the Financial Conduct Authority. This would require stablecoin issuers to hold equal reserves of pounds sterling (a Fiat money) for the tokens issued, which could not be used for purposes such as lending.
Among the measures announced was an “engagement group” for crypto business executives to meet regulators, which would be chaired by Glen, as well as “crypto sprints” organised by the FCA for private sector input on regulation and a project to study the legal status of decentralised autonomous organisations.
The government also intends to revisit the taxation rules for crypto, with Glen suggesting there would be selective changes to the treatment of decentralised finance and removing disincentives for UK fund managers to hold crypto in their portfolios.
In addition to encouraging homegrown blockchain innovation, Glen proposed a more receptive environment for offshore crypto players in the hope that the UK would be attractive to firms not yet decided on a more permanent base.
Financial Times 4th April 2022